This is a guest post about sales taxes for ecommerce entrepreneurs from Mark Faggiano, founder and CEO of TaxJar.
If you sell products, there’s a strong chance you have to pay sales taxes this January. Sales tax can be one of the more painful administrative tasks, but this refresher will help you file your January sales tax returns with minimal fuss.
Your January Sales Taxes Checklist
Double Check your Due Dates – Sales tax is governed at the individual state level and every state is different. If you owe sales tax in more than one state, then you may owe returns on different days of the month. Check this link for January 2016 sales tax due dates by state and filing frequency.
Multi-Channel Sellers: Don’t forget a shopping cart! – If you sell on more than one eCommerce platform, be sure you’re reporting how much sales tax you’ve collected from buyers on every platform. Sales tax automation services make this easy.
Zero in on “Zero Returns” – Let’s say you took some time off and actually didn’t collect any sales tax over the taxable period. If you are still registered with the state to collect sales tax, be sure to file a “zero return.” Many states want to hear from you whether you collected sales tax or not. Failing to file a return – even if you don’t owe any money – could result in your sales tax permit being cancelled or even a financial penalty.
Don’t Discount Discounts – About half the states kindly realize that collecting sales tax is a big chore for merchants. These states allow you to keep a small percentage of the sales tax you’ve collected. Here’s a list of states that allow for sales tax discounts.
And that’s it! You’re all ready to file. But while you’re in a sales tax frame of mind…
Give Yourself a Sales Tax Checkup
The first of the year is also a great time to make sure you’re online store is totally compliant. Here are a few things you can do:
Check Your Nexus – Product sellers are required to collect sales tax from buyers in states where they have sales tax nexus. Sales tax nexus is just a fancy way of saying “significant presence.” If your business is growing, you may have business activities that have established nexus in new states. These activities include:
- A location – A new office, store, warehouse, factory, etc. (Note: you’ll always have sales tax nexus in your home state.)Personnel – An employee, contractor, salesperson, etc.
- Personnel – An employee, contractor, salesperson, etc.Drop shipping – If you are in any 3-party shipping relationships you may
- Drop shipping – If you are in any 3-party shipping relationships you may have sales tax nexus3rd party affiliates – Web affiliates may give you “
- 3rd party affiliates – Web affiliates may give you “click through nexus”
- Temporarily doing business – Setting up shop at a trade show or craft fair
Every state is different, so visit this list for more about what each state considers “nexus”.
Get Registered – If you find that you have nexus in a state, make sure you’re registered for a sales tax permit in that state. Once you’re registered, the state will assign you a filing frequency and due dates for sales taxes. This post details how to register for a sales tax permit in every state.
Set up Sales Tax Collection – If you find that you have nexus in a new state, make sure you’re collecting sales taxes from all buyers in that state. If you sell on multiple shopping carts, be sure you’re collecting sales tax from customers in all of your nexus states on all of the platforms on which you sell.
Get Automated – Many states make sales taxes filing difficult, especially for multi-channel sellers or sellers who have nexus in more than one state. Save hours on your sales tax filings with sales tax automation!
Have questions or comments about sales taxes? Start the conversation in the comments or ask over 4k eCommerce sellers and sales tax experts over at SalesTaxCommunity.com.
This is a guest post from TaxJar, a service built to make sales tax compliance simple for eCommerce sellers. They are giving Launch Grow Joy readers a 30-day-free trial of TaxJar! Try it today and eliminate sales tax compliance headaches from your life![Affiliate disclaimer: This post contains affiliate links and I may get a commission if you click and sign up through my link. However, I only recommend products and services that I personally have used or believe in.]