Due to the upsurge of e-commerce, the increase of shopping without borders, a variety of purchase methods and types of products sold, the government is beginning to feel alienated on the issue of taxing transactions. Over the past few years, global authorities have updated laws to reflect the digital economy. As a result, dealing with tax obligations becomes more difficult for businessmen. Greater changes have taken place in 2022, and the mode of operation may be affected according to your business and country of residence. Moreover, for American enterprises, there is not much difference between crossing state boundaries and crossing national borders. In fact, in many ways, for example, the business of one EU country may be much more complex than selling to consumers in other EU countries.
As avalara’s friends showed in their guide to tax changes in 2022, there is a lot to discuss on this topic. Therefore, for simplicity, we will now provide a comprehensive overview of eight future tax changes for enterprises in the United States, the United Kingdom, the European Union and many other countries and regions. The first few items are mainly related to the United States, and the rest are related to other countries. 1. Nexus law – for U.S. enterprises with business location, if they sell to customers in nexus States, they must pay sales tax. I repeat, it’s simple. If your office, warehouse or other type exists, the state will have nexus. But now, because there are too many employees working remotely, many states believe that if employees live in the country, the business is connected.
That is, even if all tasks are in one task, they may be in multiple potential states. In addition, if you sell more than a specific amount or execute more than a specific number of transactions with customers in the state, you can treat you as a connector in state jurisdiction in addition to physical existence. What complicates this is that some products are exempt from sales tax, and the corresponding rules may vary from state to state. In addition, after South Dakota’s judgment on WAYFAIR 2018, states can now impose an out of state sales tax on products purchased in the state. This is to make the offline business compete more fairly with the online business. But its logistics may become a nightmare.
This becomes more complicated in some states where each county imposes different sales tax rates. For online business, you must find the states (or counties) that are considered physical or economic and calculate the sales tax payable. Learn more about sales tax changes. 2. In the changes of sales tax rate, boundary and rules, it is completely difficult to understand the debt owed. But what happens if things change? The government regularly updates the sales tax rate. Some taxed varieties such as diapers and female sanitary products will be exempted in some areas. So far, other varieties that have not been taxed are disposable plastic bags and the like.
There are also temporary tax rate changes that may be implemented during covid-19 infectious diseases, such as exemption from sales tax or exemption. Customers love them, but it makes it difficult for enterprises to carry out proper tax accounting. In addition to tax rate changes, you should also know the boundaries between tax jurisdictions. Some cities can last up to two weeks. Many cities span two counties. Sometimes houses across the street have different sales tax rates. These boundaries sometimes change. Learn more about these changes and other industrial tax changes in 2022.
3. The place and settlement method of customers’ purchase. Although customers buy online, what happens when they are delivered to the store in order to pick up the goods and live in the business place and other tax areas? This is called bopis (online purchase, store pick-up). Online sales tax is different from commodity distribution areas
。 Each customer’s purchase needs to be tracked in order to pay the right taxes to the right country, city, county or state. In the case of bnpl (buy now pay later), some decisions should be made on sales tax. For example, should sales tax on the overall purchase value be prepaid, or should it be distributed among payments? Doing it in advance means that the customer will not actually pay the same installment. If it were propagated, what would happen if the sales tax rate changed before all payments were realized? Is it necessary to levy a new amount on the remaining payments? In addition, what is the bnpl handling charge of the service provider? Moreover, what happens if the goods are returned before all payments, but the tax has been remitted to the government?
All countries, states and counties can handle different situations. 4. Purchase sales tax there are three types of purchase methods used by States to determine the payer of sales tax. Target procurement: origin Procurement Based on the buyer’s location: mixed Procurement Based on the seller’s location: before mixing the Internet and e-commerce, source procurement is the easiest and most reasonable in most cases, so source procurement is used. But now, because there are too many international business contacts during the day, the boundary becomes blurred, and many tax revenues are not collected in online purchases. As a result, many states are turning to destination procurement. In other words, taxes must be paid according to the location of the buyer. Even small businesses that sell products across the United States may need to track customers’ purchases across 50 states.
5. In the digital monitoring of business sales transactions, many regions in Europe and Latin America, as well as other countries and regions in the world, are developing methods to monitor all business transactions in order to levy an appropriate amount of sales tax and VAT. In other words, with too many international business exchanges within the EU, between the EU and the UK, between Europe and South Korea and other Asian countries, and between Canada and Latin America, the issuance of various forms of electronic invoices has rapidly become a standard. 83 countries have implemented an electronic invoice or reporting law, and more countries are working to do so. Digital transaction monitoring types include:
Real time reporting: standard audit document (SAF-t) for reporting taxes on transactions occurred: the authorities can easily collect tax information. Issue electronic invoices: the government approves each invoice before the customer sees it. 4 invoice issuance requirements: although not as strict as real-time, but the same idea, all these systems are to make compliance easier, reduce errors and minimize tax avoidance. In addition, audits can be conducted more easily and faster. Learn more about how to use electronic invoices to monitor sales tax in countries. Therefore, if your business is engaged in international business, you must comply with each country’s tax reporting and invoicing system.
Blackwest is a good example of how it works. The UK is currently implementing a plan called \
For the same EU business sold to other countries in the EU, although similar to IOSS, the one-stop sales (OSS) system is only used in commercial transactions in the EU. To access and operate all these systems, enterprises must pay some fees in advance, but in many countries \/ regions of the EU, users and business can be carried out more easily. U.S.A
Electronic invoicing or reporting systems have not been adopted. 6. Harmonious system began in 1988, but with many digital commerce today, it has become an essential part of international business activities. Harmonized system is a method of coding and tracking products every time they cross borders in all industrial fields. This makes it easier for you to monitor sales across national borders, allowing you to impose accurate VAT and sales tax on goods and services. The code is updated every five years and the 7th edition will be launched in 2022. Since not all countries update codes immediately, using HS codes can quickly become very complex. Some will take years. That is, you can sell the same item in two different countries and you must use two different codes. What happens if the product is incorrectly classified as a code? Taxes may be levied at the wrong rate, fines and delays, border problems, customization. Learn more about the coordination system and related global tax issues. 7. Abolish the minimum tax conditions, especially in the UK and EU countries, and the previous minimum requirements for the application time of VAT began to disappear. For imports into the UK, the minimum order size is £ 135 before the VAT takes effect. Like the low value consignment stock relief for goods worth less than £ 15, it is disappearing. These two VAT must now be collected at the time of sale together with the customer during the checkout period. The policy for the amount that currently exceeds this threshold has not changed. For imported products entering the EU, a similar at least 150 euros was valid before and will disappear. IOSS users must now levy VAT on all purchases below this amount at the time of sale. Many other countries, including Canada, India, Malaysia and China, are promoting similar types of tax reform. 8. Other tax issues after 2022, supply problems and labor shortage may affect your tax situation. For example, if you buy and return too many products, how to deal with the tax levied? Do you need to modify the tax return of paid tax? If you sell products through one of dozens of online market displays, such as online market place, Amazon or WAYFAIR, some states and countries will levy taxes, and the expenses can be passed on to you or not to you. Other states allow this type of seller to retain exemptions. Many countries with atypical product types that always tax car rental services and taxis now want to tax car rental services. Even if you sell online courses, you may become a tax target. However, there are several ways to make the course different. Some courses will be conducted in real time, while others will be pre recorded. The pre recorded process is close to the product. Other courses need to materials. Some people send information by mail. In other countries and regions, the situation of these types of training and education services may be different. How about the software? At present, there are at least 10 types of software product categories, such as actual products, electronic , customization and others. In other words, each type may vary depending on the country and region where you do business. Do you need tax help? Woocommerce does not provide tax services. The purpose of this document is to provide information and help for enterprises who want to understand their tax obligations. However, avalara is tax automation software that makes compliance easier. Especially across the entire territory or border of the United States
For small companies engaged in business, there are many things to track. Tax compliance software is worth seeing. Confirmation: woocommerce avatax extension integrates avalara’s software directly with the store.
