As a business owner, you know that taxes are an inevitable yet critical part of your operations. How much or how little tax to charge is integral to the success of any company. When it comes to security and alarm taxes in particular, while there are some commonalities between typical businesses and their tax obligation, there are also significant differences. it’s crucial to know if you should charge sales tax.
Understanding exactly which taxes you should be collecting as an alarm business is key for being compliant with applicable laws. In this blog post, we’ll explore why security and alarm businesses need to charge sales tax (or not), plus other important considerations related to taxation for these types of businesses. Let’s dive in!
Should I be charging my customers sales tax?
Sales tax compliance is a nuanced topic, especially because the laws vary by state and by type of business. For a long time, it was mostly businesses selling tangible products that had to collect sales tax. However, U.S. states have steadily introduced laws requiring even service-based businesses to collect sales taxes–and some business owners still mistakenly believe these tax laws don’t apply to them.
It’s important for your security business to understand these tax obligations so you can collect the correct amount of sales tax from your customers. For example, if you’re a security company operating in Illinois you may have no such tax obligations, whereas in Florida, you (along with detective agencies!) would be the two types of businesses taxed for your services.
Another complication arises if you sell both a tangible good (like physical security products) and a service (like security monitoring). In some states, you’d be responsible for sales taxes on both, whereas in others you wouldn’t.
What are my state’s requirements for sales tax?
What makes things so complicated is that the rules don’t apply the same way across the board. For example, many states exempt certain items while others have completely different tax rates for different types of goods and services. What’s more, these tax rates might even vary based on where your customers are located!
The best way to know whether you should be charging customers sales tax (and how much) is to consult with a tax professional. You may also find Avalara’s state-by-state guide to sales tax to be a useful starting point!
How can I collect and manage sales taxes?
Because taxation can be so complex, especially if you operate across different regions or states, it’s best to use a software program designed to help you manage all these numbers with ease, especially one that automates tax collection. There are a variety of programs that can help you keep accurate records of sales taxes collected, as well as those that can bill customers for products and services (as well as sales taxes) automatically.
For the alarm and security industry, Managely’s new Avalara integration simplifies the process of collecting and managing sales tax from your customers. In fact, Managely users can now easily charge their customers sales tax right from within the software. That’s in addition to Managely’s already excellent recurring billing and invoicing capabilities; accounting toolbox; Microsoft Power BI data visualization capabilities; and personalized dashboards, among other features.
How can I keep good sales tax records?
It’s important to keep accurate, up-to-date records of your business’s income and expenses–and that’s exactly where Managely can help streamline this process. Accurate records will make your life easier when it’s time to prepare and file your tax returns, as well as provide documentation if the IRS audits your business.
Software like Managely can also ensure that you keep accurate records of all your sales tax collections (if applicable), including the amount of tax collected, the tax rate, and the date of each transaction. Keeping your records accurate, accessible, and up-to-date means that you can consistently file business tax returns on time and avoid late penalties.
It can also help you keep track of the more nuanced sales tax issues that can arise as you service different customers and regions, so that you’re always sure you’re charging and collecting the correct sales taxes with each transaction.
Depending on your state, you may be required to pay sales tax on the goods and services you provide through your security and alarm business. It is important to be aware of your responsibilities in order to stay in compliance with the law. If you have any questions about whether or not you need to pay sales tax, we encourage you to consult with a qualified accountant or tax professional.