All About Sales Tax

What do you need to know about sales tax as a dance studio owner?

First and foremost, you should have a clear understanding of what sales tax is. It is a form of consumption tax imposed by the government on goods and services sold. It’s usually calculated as a percentage of the selling price. This tax is collected by the seller, (you) then remitted to the government.

Unlike income tax, sales tax is categorized as an indirect tax, as it is not directly paid to the government. As a retailer, (which you are considered if you sell merchandise or costumes of any kind at the studio) you collect sales taxes from customers and pass them on to the appropriate government entity. Sales tax serves as a significant revenue source for states nationwide, so they take it pretty seriously when they don’t receive it.

Rates and taxable items vary based on your business's and customers' locations. While tracking these rates and regulations may be challenging, there are tools and resources available to simplify the process. This is important, because ultimately it is the seller's responsibility to accurately file and submit sales tax to the state.

Remember, many states have both state and local sales taxes. For example, a state might enforce a 4% sales tax, with a county charging 2%, and a city adding 1.5%, totaling 7.5% for residents.

Because sales tax may vary greatly, it’s important to search out your state and local government regulations. For example, in some states dance lessons themselves are taxable. Costumes are taxable, but dance uniforms may not be. While we can’t provide you with a list of everything that is guaranteed to be taxable, we can give you a general list of items that may be taxable:

  • Dancewear and apparel

  • Merchandise

  • Studio rentals and facility fees

  • Registration fees

  • Preschool or other class props

  • Tuition

  • Recital tickets

  • Snacks and beverages for resale

Alongside collecting sales tax, be sure to maintain detailed records of sales transactions and the corresponding taxes collected to ensure you’re filing accurate sales tax returns.

A reliable bookkeeping company should always be aware of any legislative changes that could impact your business, as part of the services you pay for. At Dancebookkeeping.co we have an exceptional sales tax team that stays up-to-date on rate changes, and sales specific laws, and ensures our clients never over or underpay.

Pro Tip: When customers use store coupons or discounts to buy taxable items, deduct the coupon or discount amount first and then apply sales tax to the reduced amount. For manufacturer coupons where the seller is reimbursed for the coupon's value, charge tax on the coupon amount and the customer's payment.

Lindsey Sryock