4 Tips for eCommerce Sales Tax Compliance
Here are four tips to help you stay compliant:
- Make sure you are registered with the appropriate state agencies.
- Collect the correct sales tax rates for each state where you do business.
- Keep track of all sales tax exemptions that apply to your business.
- File sales tax returns on time and remit the correct amount of tax to the appropriate state agencies.
eCommerce Sales Tax: Tips for Compliance
There are a few things that eCommerce sellers need to know when it comes to sales tax compliance. Here are some tips to help you stay compliant and avoid any penalties:
1. Make sure you are registered with the appropriate state agencies.
If you sell goods or services online, you may be required to collect and remit sales tax to your state. To do so, you must first register with the appropriate state agencies. Depending on your state, this may be the Department of Revenue, the Secretary of State, or another agency.
You must provide basic information about your business, such as your name, address, and contact information. You may also be required to provide your Taxpayer Identification Number or TIN. Once you are registered, you will be issued a sales tax permit.
You must keep this permit on file and display it prominently at your place of business. Some states also require you to post a bond before collecting and remitting sales tax. The bond is intended to protect the state if you fail to remit the taxes you collect.
Depending on your state, you may be required to file sales tax returns monthly, quarterly, or annually. You must keep detailed records of all your sales, including the sale date, amount, and tax rate charged.
Contact your state’s tax agency if you have questions about registering for a sales tax permit or filing sales tax returns.
2. Collect the correct sales tax rates for each state where you do business.
As an ecommerce business, collecting the correct sales tax rates for each state you do business with is important. Depending on the type of products or services you sell, you may be required to collect state and local sales tax and any applicable use tax.
There are various ways to determine each state’s sales tax rates. You can use an online sales tax rate calculator to give you the rates for all the states where you do business. You can also check with each state’s tax authority to get the most up-to-date sales tax rates.
Once you have the sales tax rates for each state, you’ll need to set up a system to collect the tax. There are a few different options for collecting sales tax, but the most popular method is to use a shopping cart with built-in sales tax calculations.
If you use a shopping cart, you must set up a tax profile for each state where you do business. This tax profile will include the state’s sales tax rates and any special tax rules or exemptions for your products or services.
Once you set up your tax profiles, you must configure your shopping cart to calculate and collect the correct sales tax for each order. This can be tricky, but a few resources can help, like this one from Shopify.
Once you set up your sales tax collection system, staying up-to-date on the latest sales tax changes is important. Each state has the authority to change its sales tax rates at any time, so it’s important to keep an eye on the news and ensure you’re collecting the correct amount of tax.
We recommend talking to a tax professional if you have questions about sales tax compliance. They can help you determine the best way to collect and remit sales tax in your state.
3. Keep track of all sales tax exemptions for your business.
As an eCommerce business, it’s important to keep track of all sales tax exemptions that apply to your business. This ensures you correctly collect and remit the correct sales tax amount to the appropriate state and local tax authorities.
A few different types of sales tax exemptions could apply to your business. The most common type of exemption is for businesses that sell items considered “essential” or “necessities.” This can include items like food, clothing, and medicine. Other common exemptions include those for businesses that sell items for resale or for certain types of charitable organizations.
It’s important to check with your state and local tax authorities to see what exemptions apply in your area. Each state has different rules and regulations regarding sales tax, so it’s important to be familiar with the laws in your state. You can find more information on your state’s website or by contacting your local tax authority.
4. file sales tax returns on time and remit the correct amount of tax to the appropriate state agencies.
As an eCommerce business, staying compliant with sales tax laws is important. One way to do this is to file your sales tax returns on time and remit the correct amount of tax to the appropriate state agencies.