If you work on a “brick and mortar” store or make a purchase, then sales tax is given – the store collects it, the shopkeeper pays it. However, the situation is not as a clear cut on the Internet. Generally, if you have a physical location in a state, then it is necessary to collect the sales tax of that state on the items you sell. However, many consumers do not know that if you buy something online and the merchant does not make sales tax, you may still have to pay using it in your state.
Collecting Sales Tax as an Online Merchant
Determine the states in which you have to collect sales tax. Normally, you have to submit sales tax, if your business has physical location within that state.
Whether it is necessary to deposit sales tax, it also depends on how big your online business is. There are so-called “Amazon Laws” in some states, which require online merchants selling more than a certain dollar amount to collect sales tax, even if they do not have a physical presence in the state.
Having a physical presence in a state does not mean just one store. Warehouses and distribution centers can be considered as a physical presence, because the administrative offices do not sell anything.
Keep in mind that state sales tax of five states – Alaska, Delaware, Montana, New Hampshire and Oregon – is not taxed.
Learn the applicable rates and exemptions. Once you know which state you want to collect and sell, then you have to find out what the rate of tax is and what goods and services it applies to.
Most states have tax rates or different rates on certain categories like food or medicine. If one of these exemptions applies to the items you sell, then you are not responsible for collecting sales tax.
Keep in mind that sales taxes are usually assessed on retail sales, which means that if you are selling wholesale or wholesale online, you probably will not be on the hook to collect sales taxes.
Add sales tax to your checkout process. This feature is available in many shopping cart programs available for online merchants – you have to activate it.
If you are not already using a shopping cart service to handle your online sales, then you should consider doing this. Many of these programs will automatically calculate and add sales tax to the purchase, which will save you a lot of time and effort.
File sales tax return with state Each state has its own form and requirements when sales tax returns are payable.
States usually have to pay sales tax on quarterly or monthly basis to retailers.
On your tax return, you will report sales of your total sales, taxable sales and discounts, then calculate the amount of tax payable.
Each state’s revenue department has information on its website how to obtain a sales tax permit (if required in that state), as well as how to file a sales tax return and when the returns are payable.
Paying Use Tax as a Purchaser
Check your state’s requirements. Most states have sales tax, in which residents are required to pay taxes on those items they buy online or out-of-state and plan to use within the state.
It is applicable using one if you purchased goods online or outside the state with intent to use it within your state, and those items would have been subject to sales tax if you bought them in your state.
If you are charged for the sales tax of any other state, you do not usually have to pay using it, provided the rate of tax is greater than or equal to the rate of your state’s sales tax rate.
If you are sold at a lower rate than your state’s sales tax, then you usually have to pay using the same amount of difference between the two rates.
You can find out whether your state tax uses taxes by visiting your state’s tax authority’s website – usually your state’s revenue department.
Keep receipts for items purchased online. If you buy items online repeatedly, you can find it more convenient to file returns by using your monthly or quarterly instead of the time of purchase.
If you only shop online sometimes, where the sales tax is not collected, then you can go ahead and file the form and you can pay taxes if you wait instead of buying it.
Your state’s revenue department will have a schedule with the deadline, when it will be payable using. For example, after the end of the quarter using Florida, the quarter is the first day of the month. So if you live in Florida, you pay taxes for purchase made from 1st March to March 1 to March 31.
Savings receipts also allow you to keep detailed records, so you know the purchases for which you have paid or need to pay usage taxes.
Download the appropriate form. Each state has a form to calculate and report using, which is generally available on the Revenue Department website.
If you plan to use an online system and one is available in your state, then there is usually nothing to download – just follow the prompts on your state’s online system.
If you want to mail a paper form with a check for the tax you use, you will have to download the form from the state’s revenue department website or choose one of your nearest tax determinant’s office.
In the form you usually need to enter your name, address and social security number, as well as the total amount and tax you owe.
You may be able to list each item you purchased, where you bought it, the date and the amount you paid. Adding this list with your returns ensures that the state will not be able to come to you for unpaid usage taxes later on.
Enter your form with payment. For the address you want to send your return, visit your state’s website.
Many states also give you the option of filing returns online, which is usually more convenient and you can pay by using a credit or debit card.