Taxes

[evandipaola]

Previous Etsy seller transitioning to Square. Does anyone have a better grasp of how taxes are collected? I am selling clothing, and there are certain states that do not charge taxes, but I can't seem to find an "exception" rule in Square on how to prevent this from exempt states. 

Ex: NJ has no sales tax on clothing. My business is in NJ. If I sell to someone in PA, does Square collect that sales tax per PA guidelines and separate it from my revenue? Or am I responsible for reporting my total revenue AND sales tax?

[HC_Charlie]

Hello @evandipaola and thanks for your question. And Welcome to Square! Are you still selling on Etsy...I started on Etsy too, and sell both on Etsy (who takes care of sales tax for sellers as you know) and my own Square store/website. Here's the rundown on sales tax with Square (but I am NO accountant so keep that in mind)...

Square does not collect nor remit sales tax for any sellers. The most it will do is allow you to setup Sales Tax rates and apply them (add them) to your sales based on location. It is your responsibility to separate and pay the sales tax from the credit card charges that are process by Square. You'll have to setup something with your State Sales Tax office, create an account ID, and file directly to this state agency on whatever timetable that give you; some taxes are remitted monthly, quarterly, or semi annually, usually depending on your sales volume.

For info on setting up your Sales Tax rate in your Square account, check this info here.

And you would go here in your Dashboard to setup a tax rate.

I hope this helps answer your question...BTW my store is located in PA and sales tax is NOT collected on clothing. For more info on paying sales tax for out of state sales, Google or consult a tax professional LOL. But my understanding for PA where I have my biz, I don't need to collect sales tax on out of state sales UNLESS I have a physical location within those other states; the BUYER is supposed to claim these purchases when they file their income tax so it is on them.

[evandipaola]

@HC_Charlie Thanks so much! I am still selling on Etsy (running in the background) while I focus on Square. I already have my Sales and Use form from NJ State, so I am set on that end re: filing quarterly. From what I've read (and from what you are saying about your business), since I only have one location in NJ it does not seem like I would need to charge sales tax for out of state sales.

Follow up - do you include sales tax on your orders/receipts? Or not at all? And then file with PA by reporting your gross revenue?

Even my accountant is a bit dazed and confused with these online rules...

[HC_Charlie]

I know taxes are not the favorite item to deal with LOL, and not at all easy to deal with (but a necessary!) If you have your tax rate set up in Square, then when you create a sale or invoice and that item is created* as taxable, then you'll see a tax line on your receipts/invoices. I would definitely list a line to show tax collected on a taxable sale; I wouldn't hide it or anything. Sometimes some sellers will say tax is included (for ease of reporting) but I think an accountant would like to see the tax listed separately and treated as such. 

*For each ITEM you create in your Square inventory, you should see a checkbox that says TAXABLE. If your item is taxable, check this box, so when you sell this item it will automatically add a line for the sales tax.

When I file my PA sales tax, I have an online portal I sign into and it has a whole form. It asks for taxable sales, nontaxable sales, and calculates the tax I need to submit for that period. Maybe your state does the same? If not online, they should at least have a worksheet you could use to help calculate the sales tax.

One other thing, be careful taxes due don't surprise you, especially if you sell a lot around the Holidays. When you tax for that time period comes due, it could be several hundred dollars and if you've spent a lot of your cash reserves it might catch you off guard. Square has a Savings account that is great for this; you open an account, specify a certain percentage of your Square sales to automatically put aside to save in your Square account. It makes it easy to put aside at least a large portion of what you'll owe for taxes in case you're not keeping track as you go along.

I hope this helps your business plan for Sales tax. Let me know if you have any other questions.