When you have a brick-and-mortar store, sales tax is relatively simple – you only collect state and local sales tax where your store is located. However, if you have an online store, you have to submit sales tax online, it depends on your location as well as on the customer’s location. In order to submit sales tax online, you must first set up the states in whom you are responsible for the sale, then update your checkout process so that sales tax can be collected from those customers who live in those states.
Assessing Your Liability
Determine your sales tax schedule. As an online businessman, you will usually have to make sales tax in any state in which your business has physical presence, which includes a store, office or warehouse. This physical presence is known in legal form as your “Nexus”.
Physical presence extends to aspects of your business that do not directly participate in sales, such as the administrative office.
If you are unsure whether you are eligible for a physical presence in a state, contact the state’s tax or revenue agency to make sure.
There is no state sales tax in some states, such as New Hampshire and Oregon. However, even if your business is located in one of these states, but if you are there, you may be responsible for submitting sales tax in other states.
For example, if your business is headquartered in Oregon, but you have a regional distribution warehouse in Pennsylvania to distribute the products purchased in the eastern part of the country, you may need to collect sales taxes from Pennsylvania residents is.
Sales tax is applicable only to those customers who live in that place or are taking the goods sent there. This means that your sales tax liability may be different if you have a customer who is buying something in a state where you do not have a nexus, but who wants to send it to a different state in which you do it.
Your sales tax liability may also vary on the basis that you are collecting sales taxes in your “home state” (the state where you live or where your business is located), or as an external state Sales tax is collected which is a nexus in that situation.
Contact the appropriate tax authority. Once you determine the states in which you have to submit sales tax, you will be able to find out whether rates and discounts are applicable, and how you can submit returns. You must contact the sales tax department.
Sales tax is usually governed by the State Revenue Department. You can get more information about the sales tax of each state by going to the website of the state revenue department.
You can get information about sales tax by visiting a website operated by the Department of Commerce or similar state government agencies that meet small businesses.
The Federal Small Business Association (SBA) has a list of links to state departments of revenue on its website, which you can also use.
Submit a permit application. Each state will have its own form, which you will have to complete and submit the appropriate authority to obtain a sales tax permit. In some states, it is illegal to collect sales tax without proper permit.
The app requires you to provide information about your business, in which its legal name and mailing address, as well as the contact person’s name and phone number are responsible for handling your business sales tax.
Usually you have the option to complete and mail the form, or fill out an online application and submit it electronically.
If you submit it online, your application will be processed faster, because you will not have to wait for the mail.
Before submitting any method you choose, make sure that you make at least one copy of your application for your business records.
Some state applications may charge a small fee to cover the cost of processing, usually around $ 20.
After your application has been processed, you will get your sales tax permit or license in the mail, along with information about when and how you should file returns.
Keep in mind that there are different payment programs and methods for reporting in different states, so if you are submitting sales tax for many different states, then carefully read the information of each state.
Stay up to date on legal requirements. E-commerce is on the rise, and law can change rapidly in this area. States can enforce their own laws that affect your tax liability, or the federal government can make laws that govern sales tax collection in all 50 states.
In most states there are so-called “Amazon Laws”, for which large online retailers are required to collect sales tax despite having physical presence in the state.
However, if your annual sales are less than $ 1 million, then your business is generally free of these requirements.
Federal laws which have been considered, have equal waivers for small businesses selling products and services online.
Consider using a shopping cart service. Many shopping cart services automatically calculate sales tax and where you have already given information about the physical locations of your business, they collect it essentially.
Although this can save you a lot of time and effort, but keep in mind that these services are still not an option to fulfill permit applications in states where you need to collect and pay sales tax.
If you use a shopping-cart service, check regularly to make sure that you have sales tax permits in all the states where your service is collecting sales tax from your online customers.
Shopping-carts services generally remain with sales tax rates in those states, for which you should collect sales tax, so you do not have to keep them with the rates and if they change, adjust them manually Will happen.
Updating Your Checkout Process
Find sales tax information in your checkout settings. Each e-commerce host or website builder has its own checkout program and procedures, but generally you should be able to find the tax entry in your account settings.
If you use many online marketplaces, you will need to add sales tax information to each service you use.
If you need to make a sales tax in a state, you should enter the information in your checkout settings, even if you have never taken a customer before that state and you never have to guess it.
Keep in mind that some states need to submit a full return, even if you have not collected any sales tax during the given reporting period.
Enter shipping information. The information about your business address and the locations that are sent to the customer’s goods stays in your account settings, which helps determine the states for which you have to submit sales tax.
Whenever you add a new regional distribution center or warehouse, you should update your shipping account information accordingly.
Keep in mind that a warehouse or distribution center can be counted as a physical presence in that state, even if you are leasing only in the location used by many different online retailers.
Add or edit sales tax information. If you do not use shopping cart service to automatically calculate tax rates, you will need to see this information and manually input it using your website account settings.
Do not forget to enter local sales tax for those places where your business headquarters, office or warehouse is located exclusively.
If a person from that city or county is to buy something from you, then you have to collect local taxes, as if they went to a physical store and bought those products.
Generally, you have to tell whether the state is your “home state” for tax purposes. You may need to classify the state’s sales tax type – whether it is original-based or destination-based.
Keep in mind that you can also be responsible for making international sales tax, including value-added tax (VAT) for customers in the European Union. If you ship products to overseas, you can contact an international commercial attorney to assess your international tax liability.
Repeat the process as needed. If you are manually installing your website to collect sales taxes, then you will usually have to provide the same type of information for each state or region from which you want to submit sales tax.
To ensure that you are entering at the right rate, double check the rates for each state or region.
Keep in mind that at least, you probably have to collect sales tax for sale in your home states. If you have a warehouse or distribution center in other states, you will usually have to pay sales tax there also.
If you have remote employees living and working in other states, their presence in other states may also be sufficient to trigger sales tax liability.
You want to create a spreadsheet before entering the information so that you can ensure that you have all the correct rates and you have added all necessary states or areas for each account, especially if you have multiple different platforms or Sell through market places.
Consider subscribing to the tax collection service. Especially if you sell goods or services through many different platforms or marketplaces, you may want to open an account with tax collection service which will pull all sales tax information in one place.
Sales tax collections also save you from the hassle of creating a spreadsheet or otherwise compiling tax rate information, including discounts, research and keeping up to date changes.
Some tax collection services will also create your own reports and enter for you. Although generally you have to submit the application for a permit first.
Filing Sales Tax Returns
The total sales tax you have collected. Monitor your sales tax due dates on your calendar, and access your accounts on any platform or channel through which you sell goods or services to find sales taxes collected from customers in each state.
Keep in mind that some states may require monthly returns, while others expect quarter or yearly returns. The frequency with which you need to submit returns, may depend on your sales volume.
If you have not subscribed to the sales tax collection service, then you have to create a spreadsheet to track this information yourself.
Check each situation to determine how much information you need to collect. Some states require you to collect sales tax in the county or tax district in the state within the state.
Complete the required returns. Some states will have to fill a form and match their payment. However, most states allow you to complete your sales tax return and make your payment online.
Usually you can access the required forms to complete your return on the website of the State Revenue Department.
The state can send you the form before your due date or else you can inform that tax is payable, but do not trust it or if you do not listen, wait for the file.
Focus on the required information on tax returns. If you are not using the sales tax collection service to manage your sales tax, then you can design your own spreadsheets to mirror the information required on the return so that you can easily transfer the right information.
Some state forms may require you to break taxes collected in specific parts of the state.
Submit your return. Many states allow you to easily submit your returns and payments online. Make sure you have the appropriate deadlines on your calendar because they can be different between the states. Some states require you to file monthly or quarterly returns, while others only need annual returns.
Generally, any month has a 20th deadline, but do not believe that if you are submitting sales tax in many states the dates will be the same.
Keep in mind that in many states, you will have to file returns if you have a permit or license to deposit sales tax for that state, even if you actually collect any during the reporting period.
If you have not collected any sales tax for a given state, check with the State Revenue Department to determine whether you need to file a “zero return”.
Before submitting the state with the payment, make a copy of your return for your own business records.