Managing sales and use tax is complicated for any business, especially when you’re starting out. Whether your business runs out of South Carolina or Georgia, this resource will show you how to collect and pay sales and use tax throughout the year. That way, you’re not met with a painful and unexpected bill at the end of tax season.
Sales and use tax overview
Sales and use tax refers to two different types of taxes. Sales tax is what’s owed to local or state government on the sale of goods and some services, and use tax is what’s owed when taxes aren’t paid at the point of sale. For instance, if something was purchased out of state, and then brought into South Carolina or Georgia for use, it is subject to state use taxes and must be reported.
In South Carolina, the statewide rate is 6%, with counties able to add an additional 1% local sales tax with voter approval. With additional special district taxes, South Carolina’s range goes from 6% to 9%.
In Georgia, the statewide rate is 4%. With local tax and special district taxes, rates fluctuate between 4% and 9%. Also specific to Georgia, most services are exempt from sales tax, other than individual transportation, admission sales, and charges for participation in games or amusement activities.
How to know if you owe sales tax within a state
In either state, businesses should consider the same three questions.
- Are the goods or services you’re selling taxable within the state you’re selling to, or are they exempt?
- Are the buyers you’re selling to required to pay sales tax?
- Do you have a nexus with the applicable state?
A nexus is a fancy word for a significant connection with the state at hand. Before 2018, this was simply determined by if you had a physical location within the state. These days, however, you can have a nexus even as an out-of-state seller. Out-of-state sellers may have an affiliate, click-through, or economic nexus, or one established through having inventory in the state, marketplace sales, or trade shows.
If your answer is yes to all three questions, you may be required to register with the state’s DOR and to charge, collect and submit sales tax to the state.
Collecting and remitting
Once you’ve obtained your business license and sales tax registration, it’s time to start collecting. Make sure to determine the correct rate and collect taxes at the point of sale. Doing so afterward may be impossible.
When it’s time to file, there are two parts to filing your sales tax return, due at the same time:
- Filing the return with your sales data
- Paying the necessary tax dollars to the DOR
You’ll need to account for your total sales, the amount of sales tax you collected, and the location of each sale. Even if you have a collection period where no taxable sales occur, you still must file a “zero return” reporting that information.
In both states, businesses can file by paper or online. For online filing, South Carolina uses the MyDORWAY web portal and Georgia uses the Georgia Tax Portal. Those preferring to file by paper can use the ST-3 state sales and use tax return form, but businesses of a certain size are required to file online. In South Carolina, the requirement falls on businesses making more than $15,000, and in Georgia, it’s businesses that owe over $500 in sales and use tax for that period.
Filing sales and use tax on time
In both South Carolina and Georgia, the DOR will determine your schedule for remitting sales tax and typically assign a monthly filing frequency. With this schedule, returns are due on the 20th day of each month and adjustments for weekends and holidays. You can find the exact schedules on the DOR websites for South Carolina and Georgia.
Filing late will incur a penalty and interest on outstanding payments, but it’s always better to file late than never! To encourage filing on time, both states offer discounts to early filers.
Getting help from a CPA
No matter what state requirements you’re dealing with, sales and use tax can be time-consuming and mistakes can be costly. That’s why many businesses outsource their returns to financial professionals. Whether you’re a new business or one looking to streamline your processes, SME CPAs can help. As experts in both Georgia and South Carolina tax law, trust in us to keep your business penalty-free throughout the year.