Business Sales Tax: Definition & Types

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  • 0:00 Sales Tax
  • 0:58 Sales Tax Permit
  • 1:25 Taxable Items
  • 2:12 Exemptions
  • 2:41 Lesson Summary
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Lesson Transcript
Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you'll have an understanding of how businesses deal with sales tax. You'll also learn how a business calculates sales tax and pays it to the state.

Sales Tax

Have you ever wanted to start your own business? Perhaps one where you sell stickers to your friends? Well, let's pretend that you have your very own business selling hundreds of stickers each week to your friends and their friends. As a good business person, you keep accurate records of your sales and make sure you're collecting the right amount of sales tax.

Sales tax is the percentage of each sale that is due to state and local governments. Each state and local government sets its own percentage. For example, as of 2017, the state of California has a base tax rate of 7.25 percent. In addition to the statewide tax, each county adds an additional percentage ranging from 0.10 percent to 2 percent. In Los Angeles County, that rate was 1.5 percent in 2017. As you make your sticker sales, you keep detailed records of each one, including those sales made both in and out of California.

Sales Tax Permit

As you live in and are selling your stickers in the state of California, you have a sales tax permit, a requirement that allows businesses to sell and collect sales taxes on products or services. This permit also facilitates the way you pay your taxes to the state of California. Some, but not all states require sales tax permits. Each state also has different filing requirements for sales taxes, such as monthly, quarterly, or yearly reporting.

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