Once upon a time, the sales tax was very simple for e -commerce stores in the United States. Before the regulatory agency caught up with the industry, enterprises can give up the sales tax on transactions in the state without entity.
In 2018, when the Supreme Court of the United States ruled
When the WayFair case of the state of South Dakota , the incident became more complicated Each state can formulate the sales tax of e -commerce stores to formulate taxes. Many rules. Today, 45 states have sales taxes in the state -Each state has its own meticulous rules. In addition, there are currently more than 11,000 different cities, counties and local tax jurisdictions. Tracking everything may be difficult.
Five sales tax traps to be avoided
Due to the complexity of US sales tax, avoiding the following common errors can help you understand most of the sales tax compliance. It is worth the less exciting part of the ownership of e -commerce business.
Trap#1: No aware of you need to levy sales tax
Three years have passed, but some companies still have not updated their sales tax practices. If it is you and your company has not collected or archived, you need to talk to the state and local tax consultant (SALT) to understand your responsibility for past taxes and formulate forward plans.
The good news is that when you go to the national tax department, they are usually more tolerant than when they find the mistake.
The following situations are even more common: the company knows that e -commerce stores must pay sales tax, but because of the types of products they sell, they mistakenly believe that
they are tax -free. This is often made by SaaS and digital merchants.
The development speed of regulations is often slower than technology, and the sales tax has been concentrated on TV and furniture for many years. But in the past few years, there have been no tangible products to increase at all -for example, software ed from the cloud. The software does not need to tax on the physical CD-ROM, so in the past, many people think it is exempt from sales tax. As the sales of these invisible digital products have increased, they are revising the law to increase income.
Today, 20 states tax on SaaS (software as service) products
. It is worth seeing how each of them taxes SaaS. Does your product belong to this category? Many states distinguish digital products such as e -books and software, so you need to pay attention to proper classification of your products.
Trap#2: Forget the tracking relationship
Nexus is one of the most tricky concepts in terms of sales tax compliance. Basically, Nexus is a state that requires enterprises to levy and pay sales tax
. This was mainly entities (for example, business existence in a state), but after WayFair, the state set up economic thresholds in the form of total sales and transactions.
In order to maintain compliance, you need to understand these thresholds and track the data of each state so that you know where you do and do not need to collect and pay the sales tax. If you have passed the associated threshold without knowing it and did not start charging the sales tax to your customers, your company will be responsible for paying these taxes at your own expense. This is not fun -ask these six retailers.
Trap#3: Diversified data and report If you are a [ 123] Multi -channel sellers , data stored in different islands, then trying to track your sales tax compliance and associated status will be more difficult. If some of your sales channels are promoters such as Amazon, eBay, and ETSY, this will become particularly challenging. Most states have laws that require these market promoters to collect and pay sales tax for you. This means You have a responsibility to collect sales tax on a website supported by Woocommerce. Third -party seller.
When the sales of these market promoters are included in your related threshold, different states have different rules. As you can see, it will soon become complicated . The sales tax report instrument board can provide you with a single and overall picture of all sales in each channel, as well as the content collected for you and what you need to collect. This will save you a lot of time and better make you strategic significance in compliance.
Trap#4: Error Classification Products (and its tax rate)
Do you know that in New York, Park Cake as a grocery staple food is tax -free -but once you cut it The same Baiji cake is 8.75%as a prefabricated food? In New Jersey, real fur clothing is regarded as luxury goods and taxes, but synthetic fur is not. At the same time, in the next door of in Pennsylvania , synthetic fur and real fur need to be taxed. The tax code is full of this subtle difference, Each state has different definitions and parameters . It is important to accurately understand the classification of your products in each state. The sales tax software can automatically perform these categories, but if your company’s products can be explained according to its taxable, you may need to consult the sales tax professionals.
Trap#5: Miss the deadline for submission
Not only the application deadline for each state is different, but for many of them, The application date may be With the company’s scale with the size of the company’s scale Expansion and change. Generally, the more income from your company, the higher the frequency of your states hope to pay taxes.
The deadline for each month, each quarter and each year, specifically depending on the state and you Company Size. Most states require taxpayers to be submitted on the 20th after the tax period. However, some states require the sales taxpayer to submit one month after the taxable period. There are also a few required companies to submit their applications before the 15th or 23rd. This is why you need to pay attention to the application date of the state where you have.
Automated compliance: saving time, reducing errors
If all of this looks a bit overwhelming, it is good news. Sales tax software like TAXJAR can be seamlessly collaborated with Woocommerce, and it can be automated most of the processes . This includes the difficulty of sales tax compliance, such as real -time calculations, summary reports from all channels, and documents submitted to each state. The correct automation solution will even track your relationship in each state and warn you when you approach the threshold. It will also track the annoying mobile application date.
If you are worried that you are not compliant, it is time to take action. Arrange meetings with SALT consultants to discuss your specific situation and make plans. If you have collected the sales tax but not collected, they can help you complete the follow -up steps to do your bestReduce fines and penalties.
If you have not yet automated sales tax, you should consider it.You will save a lot of time, these times can be spent on more strategic issues, and you will reduce the possibility of errors.Because in the final analysis, we are all people.
