7 Critical Things Ecommerce Businesses Need To Know About Sales Taxes
In the last few years, there has been a mushrooming of Ecommerce businesses all over the world. With growth expected to be in double digits, platforms in the space are expected to become huge in the next few years. However, while the advent of digital platforms and technologies have made starting businesses simpler, taxes is one area that has not been easy.
- What do you do if you are the entrepreneur of a fledging Ecommerce business?
- How do you address your businesses’ tax requirements?
- Can you get into trouble for missing your sales tax filings?
In this article, we are going to look at seven important things Ecommerce businesses need to know about sales taxes. Additionally, we are also going to shed some light on the all-important sales tax nexus laws and how they affect your business.
List of 7 Critical Things Ecommerce Businesses need to know about Sales Tax
There is no Federal Sales Tax Structure-
Ecommerce businesses need to know that Sales Taxes is always collected at the state level. In other words, there are no federal regulations for sales taxes as there are for personal income taxes. Some states do not have any sales tax regulations (Oregon, New Hampshire, Montana, and Delaware). While other states, nearly all the major ones, have them.
A Sales Tax Permit needs to be filed before actual collections-
Before a business starts collecting sales tax from its customers in a particular state where it is running operations, it needs to secure a permit first. If you are collecting sales taxes without filing a permit once, this will be deemed as an illegal occupation that will invite legal charges. Getting a sales tax permit can be filed through proper paperwork with help from an expert.
Sales Tax Nexus needs to be filed in states where the Ecommerce business has a presence-
An Ecommerce businesses’ understanding sales tax nexus is critically important. However, such a business needs to file sales tax nexus only in states where it has a presence. This presence can be both physical presences as well as sales presence. If you are selling above a stipulated number in terms of consumers or generating revenues, you need to pay sales tax nexus.
Location Sales Tax Nexus is a tricky affair-
If you think you will be able to fix the sales tax nexus easily, think again. Ecommerce platforms are new businesses that operate in different ways. Digital presence, FBA centers, number of consumers, revenues billed, etc. are all taken into consideration to fix sales tax nexus. This is something that is not as easy to understand as it is made out to be.
Sales Tax slabs and rates vary from state to state-
No two states have the same tax slab. This was the Supreme Court ruling in the Wayfair Versus State of South Dakota case. This has led to a complicated engagement between Ecommerce businesses and tax authorities in the different states. This makes the entire process a complicated one and leads to a lot of troubles for Ecommerce businesses all over the US.
Hiring Sales Tax Expert is the Best Solution-
Ecommerce businesses need to concentrate on running successful enterprises. They have so many things on their minds that devoting additional time to filing sales taxes becomes an impossible proposition. In such instances, hiring the services of experts that can help with all the paperwork, filings, and tax deductions look like the most rational choice and decision.
Failure to Comply with Sales Tax Nexus Laws invites action-
With digital records, tracking offenders of sales tax nexus laws has become relatively easy. If an Ecommerce business is not paying sales tax nexus it can invite serious legal action. This can range from penalties, fines to more serious punishments like cancellation of sales tax permits and licenses that will prevent the Ecommerce business from operating in a state.
The Bottom Line No Ecommerce business owner wants to spend ten days in a month doing their sales tax returns. What they should rather opt for is a firm or individual that can help them with all their sales tax concerns. This can help them direct all their attention towards improving their business without worrying about the paperwork, the filing, deductions, and punishments.