[This article was written by Tarah Mills.]
Sales tax is just one more item on a long list of things for an e-commerce business to manage, but it’s important not to neglect it. Sales tax is something all businesses that sell tangible goods need to collect and remit to every state in which they have business operations. This becomes more complicated for online businesses that sell both nationally and internationally, which makes consulting a sales tax expert even more of a necessity.
You Need A Sales Tax Permit
Whenever you start a business, you need to register that company with the proper authorities before you open your doors. If you sell goods, whether in-store or online, you will need to secure a sales tax permit from the state in which you will be operating your business. This is true whether you are incorporating your company or simply making sales online as a small-time sole proprietor. Businesses that provide services are generally not required to collect sales tax. You apply for a permit from the state and, when accepted, you receive documentation that tells you, based on your location, the percentage of each sale you will owe in sales tax. A sales tax consultant is an invaluable resource for ensuring your business is set up properly from a taxation standpoint and that you are collecting the correct amount on the right items.
Sales Tax For Sales Over The Internet Can Be Complicated
In a brick and mortar store, sales tax is relatively simple. But when selling across state and even country borders, it can become much more complicated. The general rule is that you only need to collect sales tax on sales made in states where your company has a physical presence, which is called a nexus, but some states are passing laws that will allow them to collect taxes on Internet purchases. Different states have different definitions of what constitutes “doing business” in their state as well. Consulting a sales tax professional can help you straighten this all out and will also keep you informed of any new laws going into effect that will impact your business.
There Is Also Use Tax
You may be marginally familiar with sales tax but use tax may be a foreign concept. Only businesspeople who deal in commerce usually need to concern themselves with it, so it isn’t as widely known or understood among the general public. Use tax is a tax that is collected when purchases are made from another state to be used in another. It only applies if sales tax was not collected in the state of origin when it should have been. Online merchants may face use tax if they purchase goods from other states to use, store or sell in their own state, and in fact, they are more likely to need to pay it due to the large purchases of tangible goods retailers often make. Your e-commerce business may also be required to inform customers that they are responsible for paying use tax on goods purchased from you.
To Avoid An Audit, Or Get Help If You Get Audited
Every business owner dreads an audit, as it can be a frustrating, time-consuming process that takes your attention away from where it should be—growing your business. It is best to avoid one in the first place by filing your taxes correctly and paying the full amount owed, but sometimes you may just get audited for one reason or another. A professional tax consultant can help with your specific sales tax situation throughout an audit if one happens to you, as well as give you advice on how to avoid another one in the future. If you enlist a consultant from the beginning, they can help ensure you always pay the correct amount in sales tax to make getting audited much less likely.
Due to the ever-increasing complexity of sales tax as it relates to e-commerce businesses, a sales tax expert is often a worthwhile investment. Neglecting to collect and remit sales tax can land your business in legal trouble where you will be forced to pay the amount due, usually with added fees. Working with tax professionals can help prevent this. They are there to help whether your established e-commerce business needs aid or you want to get a new enterprise off to the right start.
Tarah Mills has always had a passion for writing. Her philosophy is that not only can writing be educational, but it can change the world. While she is dedicated to her work, she still enjoys a good game of basketball, curling up to a good book, and all things Star Wars. She currently resides in the Richmond, Virginia area with her family.