Collecting sales taxes is one of the most confusing parts of running a business. And you should be collecting sales taxes if you sell a physical product (like . . . oh, I don’t know . . . art!).
But your life will be a lot easier if you take a class. Or two. Or three.
First, make sure your business is registered with your state. In Colorado, this is through our Department of State either by registering as an LLC or corporation or reserving a name for a sole proprietorship.
Next, you’ll need a sales tax license. In Colorado, we apply for a license through the Department of Revenue.
Colorado is a “point of delivery” state, meaning that we collect taxes based on the locations we have in common with the recipient. So, if I ship something to Durango, I only charge State sales tax. If I ship to my hometown of Golden, I charge State, City, County, and a special Denver-area tax.
It’s enough to make a person go mad! Instead of pulling my hair out*, I sought help.
Find a class
Check with your state and municipal departments of revenue for free tax classes. A good tax class will tell you how to 1) collect taxes and 2) submit them to the government entity.
Moreover, you will make contacts in the revenue offices that can help with any future questions.
I can only speak of my experience in Colorado. Your department names and form requirements might be very different.
*I’m still tempted to pull my hair out from time to time, but I know people are there to help if I need it.