does square collect sales tax?

Square POS system is a great choice for businesses that want a suite of tools for growing their business. But does Square collect sales tax? What about filing and paying sales tax? 

As a business owner, you want to operate your business with maximum efficiency. Sales tax should be no different. 

Read on to learn how Square collects sales tax, and how you can use integrations to fully automate sales tax with your Square POS. 

Does Square collect sales tax? 

Square will collect sales tax with every purchase, but you must set the correct sales tax rate.

Your sales tax rate includes the state sales tax rate, as well as any local sales tax rates. You can view our state sales tax guide to see what the sales tax rates are for your location. Keep in mind that if you make sales in multiple locations, you’ll need to calculate the correct sales tax rate for each location. 

With Square, you can add tax registrations to have Square automatically calculate sales tax rates for each location. Always double check and keep apprised of sales tax updates. 

Once you’ve entered the correct sales tax rate, Square will add sales tax to every purchase. 

But what happens when the sales tax bill is due? Charging sales tax is just the first step in the sales tax process. You must also set sales tax money aside, and then file and pay the correct sales tax amount when your sales tax bill is due. That could be every quarter, or every month. 

Sales tax is an area where a lot of business owners can get behind on quickly. Understanding your sales tax responsibilities is a good first step in staying ahead of sales tax. 

How to avoid falling behind on sales tax  

If your business makes many sales a day – like a restaurant or nail salon – it can be difficult to stay on top of sales tax. Without a system in place, it can get overwhelming tracking how much sales tax you have collected. 

If you don’t set sales tax funds aside in a separate account, it can be tricky to get a clear picture of your cash flow. You may see a certain number in the bank, but the reality is that that number minus your sales tax funds is the true number available to you to use. This confusion leads some business owners to accidentally spending sales tax money. When the sales tax bill comes, they either have to cut into profits to pay the bill, or come up short. 

Falling behind on sales tax can be serious. There are large penalties and fees for not paying sales tax on time, making it difficult for small businesses to ever catch up. What’s worse is that these penalties can snowball into jail time if not addressed. And unlike other debts, tax debt is a personal liability, meaning that if you sell your business you still need to pay your outstanding sales tax. 

How can you avoid going down that route? 

You need a system that automates the sales tax process from collection to payment. If your sales tax is automated, you don’t have to worry about falling behind or paying the incorrect amount. 

Luckily, you can automate sales tax with DAVO.. 

How to automate sales tax with Square and DAVO  

DAVO Sales Tax is an integrated app on Square’s App Marketplace. 

DAVO automates every aspect of sales tax, from collecting sales tax to setting sales tax money aside, and filing and paying sales tax in-full and on-time. 

Setting up DAVO on your Square system is simple, and seamless. Once it’s set up, DAVO doesn’t require any additional steps. Simply make your sales as usual. 

The way it works is that DAVO will collect sales tax from every purchase. Once a day, it will set aside the sales tax collected to a separate account, so you don’t accidentally spend that money. 

Once it’s time to pay the tax bill, DAVO will file and pay the correct sales tax amount on-time, and in-full. When you use DAVO, you don’t have to keep track of when your sales tax bill is due, and calculate how much you owe. DAVO does it automatically for you. 

There are 27 states that offer sales tax discounts when you pay on time. If you live in one of those states, you’ll always receive the discount when you use DAVO and Square. DAVO will even automatically calculate, collect, and refund this tax discount so you save money on every tax bill. 
When you connect DAVO with your Square account, you can fully automate sales tax so you never fall behind. You can try DAVO for free today!