Tax Account Registration

Doing business in your state, you’ll need to pay Sales and Use tax on your work, and as such you will need to register for a tax account with your state’s Department of Revenue. During that registration you will be asked many many questions about your business.

Some of the information is obvious, like your EIN and business location, but some is not, so don’t rush to complete it. This is not the form to hurry through and worry about later. You may need to consult your accountant or lawyer regarding some of these questions. For example: you’ll need to decide how you’ll pay the taxes, i.e. on accrual or cash basis. A description directly from the IRS:

Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses. Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. You deduct expenses in the tax year you incur them, regardless of when payment is made.

Similarly, many questions regard the sale of tangible property, which is often a complex legal matter. Speaking in layman’s terms for the purposes of our discussion, tangible property is physical property as opposed to intangible property like intellectual property and patents. In order to answer these tangible property-related questions accurately, you’ll need either to read up on the law or consult your accountant and lawyer and tell him what your exact business activities are so they can advise you.

Finally, don’t just tick off answers because you’re in a hurry, forget what your response was, and then find a costly mess come tax time. Review the registration and make a list of questions, then consult  your lawyer and/or accountant (or go on your own and do your research), and finally with that information complete the registration.

Most of the information will simply be kept on file, but others, like your fiscal year and filing frequency, will affect you regularly, so: fill out this form carefully, print it out, and make some reminders regarding filing dates and what information you need to record regarding your work. And as with your EIN, keep your State Tax Account Number on file and handy.