A Small Business Guide to E-Commerce Sales Tax
E-commerce helps simplify business operations, but sales tax has nothing to do with it. Our website may be compensated by partners or advertisers who have published their content on this site. Compensation can affect how the content of the websites is displayed, but editorial opinions, ratings, and reviews are independent and not influenced by advertisers or partners. Your website can be accessed from 50 US states, each imposing varying laws on taxes. What can I do to make sure I am following my rules? This article covers the best practices for managing sales tax in a profitable online business.
6 Steps How to Comply with Sales Tax
After you’ve determined you can sell tax-free taxable items to other states, the time comes to be fully compliant.
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Report sales tax
If your state has issued the permits, you can file your sales taxes at a frequency of 10 to 30 days. You will have your sales tax due date either once a month, once a week, or sometimes once a month. Please note that the sales tax due in each state differs slightly. Some states want to contact you within the next 20 days of your tax year, whereas others want to do so by the last day of the month, either 15 or 22 days. When it gets out of hand, you’re going to report how much revenue you have gained from the sales tax. The government wants a number, so it’s a simple job.
Origin & destination-based sales tax procurement
As I’ve mentioned previously, every state can set its own rules on sales taxes. State tax sources differ by nature, being either originating-based or destination-based sales tax sources. These states can decide whether a seller’s website charges sales taxes based on the sales tax rates for a business location (originating sourcing); online sales tax on delivery to address is collected from the customer’s address (destination-based sourcing). From the state’s viewpoint, all localities are guaranteed an absolute sales tax receipt for all buyers within their jurisdictions.
Collect sales tax
Set up and collect online sales taxes on your purchases on all your online stores and marketplaces. Sales tax collectors can collect any sale tax amount by using the cart and marketplace. In addition, Amazon provides incredibly detailed sales tax collecting software. eBay allows online sellers to collect one sale tax for buyers per state. How do states collect different sales tax rates? The concept of sales tax sourcing causes this. I’ve learned the basics now!
Register for a sales tax permit
Make sure you register to receive a sales tax exemption before going to work or doing other business in the Nexus. The state requires information about your company to identify yourself as a business person. Learn more about getting a sales tax permit here. Do not skip any of the above steps. Most states do not require permits to collect sales taxes. They view the collection of sales without permits as claiming that they collect the taxes themselves and not collecting sales for themselves.
Destination-based sales tax collection example
Amanda lives and works from Stamford, NY. She charges a no sales tax on Stamford home sales. New York has a destination sales tax state, and Amanda has to charge the customer a Buffalo sales tax rate if the sale or shipment of a product is made.
Origin-based sales tax collection example
Lou currently lives and sells online at home in Irving, Texas. Texas Tax on Origins, so Lou charges his customers an 8% home rate in Irving for the sale if the sale takes place. He does not charge his client Archer’s rates.
How to comply with e-commerce sales tax laws for your business?
How can I get sales tax for my website?
Determine where you have sales tax nexus
Online sellers have a primary responsibility to understand American sales taxes in their businesses. In 44 countries, there is a sales tax. The states with no sales tax include Alaska, Colorado, New Hampshire, and Oregon. The majority of states requiring sales tax are Florida and Missouri. Alaska has nuances. While Alaska has no sales taxes, many local jurisdictions in Alaska impose sales taxes. Alaska’s latest legislation requires remote sellers to collect these taxes by 2020. State governments are adapting now that the Wayfair Act is in effect.
Collect and remit sales taxes
Every state has a different approach to the payment of sales tax. Typically tax forms can be submitted each month, though many state governments have incorporated quarterly filing rules.
Obtain seller’s permits
Once you decide where to collect sales tax, you must apply to your local tax authorities. Some states will require a Buyer’s Permit. In Alaska, registering is usually managed by the Revenue Department and is often done online.
Check affiliate policies
Those who sell on Amazon or Etsy can take on the bulk.
Clearly understanding and applying the correct sales tax based on the region you are selling your goods and services in is a challenge for all entrepreneurs. However, apart from following these steps, there is another way to handle the sales tax issue. Partnering with a dedicated eCommerce solution like PayPro that can offer you comprehensive tax management service is the simplest solution for your business. This will remove the sales tax hassle and give you the peace of mind that your business is in good hands.