Most med spas sell retail skincare, and in most states retail products are subject to sales tax. Whether services are taxable varies widely by state and by service type. Getting sales tax wrong rarely causes a problem immediately, which is exactly why it can grow into a large one. Use this checklist with your CPA.
1. Confirm what is taxable in your state
Rules differ by state and sometimes by city or county. Confirm with your CPA or your state's revenue department:
- Which retail products are taxable
- Whether any of your services are taxable
- The correct rate for your location
- Your filing frequency
2. Set up the POS correctly
- Mark each product and service as taxable or non-taxable.
- Set the right rate for your location.
- Make sure packages that mix products and services are handled correctly.
3. Record collected tax as a liability
Sales tax collected is not your revenue. Record it in a sales tax payable account and keep it out of revenue reports.
4. Reconcile monthly
Compare sales tax collected in the POS with the payable balance in your books. Differences often come from refunds, discounts or misconfigured items.
5. File and pay on time
Put filing dates on your calendar and keep the money in a separate account so it is always available.
6. Watch for changes
Rates and rules change. Review your setup at least once a year and whenever you add new product categories, sell online or open a location in a different jurisdiction.
7. Online sales
If you sell products online and ship to other states, different rules may apply. Ask your CPA before launching or expanding an online store.
Sales tax is one area where a short annual review with a professional can prevent a large and avoidable bill later.
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