Whether you have a brick-and-mortar storefront, run your business in the field, or work exclusively online, you need to collect sales tax if you sell taxable goods and services. This can be a cumbersome and sometimes confusing process, but a bit of knowledge and the right tools can help.
Point of Sale Systems
If you have a storefront, a point of sale system can help you tack sales tax onto each sale. You can buy a traditional system with software that you download onto computers, or use a cloud-based POS system such as Instore. This app runs on an iPad and offers everything a small business owner needs to process sales including automatic sales tax calculation.
Alternatively, if you are out in the field, you need a program that can calculate sales tax instantly and accept credit card payments. An app such as QuickBooks Payments or Square can help. You simply create a bill with the relevant pricing and sales tax rate, and then swipe your customer’s credit card. Like other payment processing programs, QuickBooks Payments charges a nominal fee per transaction and a percentage of each sale, and it dispatches the funds to your account after the transaction is processed.
If you sell products or services on your website, you need an e-commerce solution that can help you with processing credit cards, electronic cheques, digital currency such as Bitcoin, or whichever types of payments you want to accept. Companies such as Helcim and NXGEN offer merchant accounts for e-commerce sites. When comparing options, look at the processing fees, but also keep sales tax capabilities in mind.
In most cases, when people order a product or service in Canada, they have to pay sales tax based on where they live. As a result, you need an application that can apply sales tax based on the shipping address of the customer.
If you don’t like any of the tech tools listed above or if they simply aren’t right for your circumstances, you may want to use something more basic to calculate sales tax rates. For example, you could use a free invoice template that lets you customize the sales tax rate. Alternatively, you may use accounting software that creates invoices with sales tax, or an online shopping cart that generates federal and provincial sales tax based on the shipping address of your clients.
Tracking Sales Tax Payments
If you decide to use paper invoices, you will need to track your sales tax payments manually. In this case, you simply enter the amount of the sale and the amount of the sales tax in different parts of your accounting software. However, if you use a cloud-based solution such as a POS app, a mobile credit card processor, or e-commerce payment portal, you should sync it with your accounting software. This way, you always have your sales tax information well-organised, and won’t have to worry about forgetting to note any payments.