4 eCommerce Sales Tax Myths You Need to Know
When it comes to taxes, there are a lot of myths and misconceptions out there. And when it comes to ecommerce sales tax, the myths can be even more confusing.
To help clear things up, we’ve debunked some of the most common ecommerce sales tax myths:
1. You Don’t Have to Charge Sales Tax on eCommerce Orders
When it comes to sales tax, many myths are floating around. One of the most common myths is that you don’t have to charge sales tax on eCommerce orders. This isn’t true. If you’re selling products online, you may be required to collect and remit sales tax to multiple states.
The first thing to understand is that sales tax is a tax on the end consumer. This means that the seller is responsible for collecting the tax from the buyer and remitting it to the appropriate state tax authorities. The seller is not responsible for paying the tax themselves.
A few states don’t have a sales tax, but most do. And, if you’re selling products online, you may be required to collect and remit sales tax to multiple states. This is because sales tax is generally based on the buyer’s ship-to address.
For example, let’s say you sell products online and you have a customer in New York. You would be responsible for collecting and remitting sales tax to the state of New York. But, if you also have a customer in California, you would be responsible for collecting and remitting sales tax to the state of California as well.
The good news is that a few states have what’s “use tax.” This tax is imposed on the buyer to use goods in the state. So, if you have a customer in a state that doesn’t have a sales tax, you may still be required to collect and remit use tax.
The bottom line is that you must familiarize yourself with the sales tax laws in each state where you have customers. This way, you can ensure that you’re collecting and remitting the correct amount of tax.
2. You Only Have to Charge Sales Tax in the State Where You Have a Physical Presence
When it comes to sales tax, many myths and misconceptions are floating around. One of the most common is that you only have to charge sales tax in the state where you have a physical presence.
This is not true.
To understand why, you first need to understand the concept of nexus. Nexus is a connection you have to a state requiring you to collect and remit sales tax. There are a few ways to establish nexus, but physical presence in the state is the most common.
However, there are other ways to establish nexus as well.
For example, if you sell products through an online marketplace like Amazon, you may be required to collect and remit sales tax in states with a physical presence.
In addition, some states have what are called economic nexus laws. These laws require out-of-state sellers to collect and remit sales tax if they reach a certain state sales threshold.
For example, in New York, out-of-state sellers must collect and remit sales tax if they make more than $100,000 in sales or have 200 or more transactions in the state in a year.
So, as you can see, there is no one-size-fits-all answer to whether you need to charge sales tax in a particular state. It all depends on your specific situation.
Knowing the sales tax requirements in each state is important if you sell products online. Failure to comply with the law can result in hefty penalties, so it’s better to be safe than sorry.
If you need help determining whether or not you need to collect and remit sales tax in a particular state, several resources are available, including the Streamlined Sales Tax website.
3. You Don’t Have to Charge Sales Tax on Shipping and Handling
Sales tax is one of the most common misconceptions regarding eCommerce. Many online shoppers believe they don’t have to pay sales tax on shipping and handling, but this isn’t true. In most cases, sales tax must be collected on the product, shipping, and handling charges.
There are a few states where sales tax isn’t charged on shipping and handling, but these are generally the exception rather than the rule. In most cases, if sales tax is charged on the product, it will also be charged on shipping and handling.
One common misconception is that sales tax only applies to physical goods. This isn’t the case, either. Sales tax also applies to digital products like eBooks, software, and online courses. Sales tax generally applies to any product or service sold for a profit.
If you’re selling products or services online, it’s important to be aware of the sales tax laws in your state. Failure to collect and remit sales tax can result in hefty penalties, so it should not be taken lightly.
We recommend speaking to a tax professional if you have any questions about sales tax or whether you need to collect it. They can help you understand the laws in your state and ensure that you comply.
4. You Don’t Have to Charge Sales Tax on Digital Goods
This is one of the most common myths about sales tax. Whether or not you have to charge sales tax on digital goods depends on the state in which your customer resides.
Some states, like New York, have what’s tax exemption for digital goods.” This means you” don’t have to charge’s tax on digital goods if the customer resides in New York.
However, other states, like California, do not have a sales tax exemption for digital goods. This means you must charge sales tax on digital goods if the customer resides in California.
The bottom line is whether or not you have to charge sales tax on digital goods depends on the state in which your customer resides.
