A lot of retailers are quite familiar with business sales tax. It applies to the extra percentages collected from buyers to be remitted to the authorities in many states. When you own a physical store in a state that requires you to collect sales tax, then you must add this to the bills paid for your goods and services which will be sent off to the local tax authorities periodically.
However, these processes of collecting and remitting business sales tax for e-commerce businesses may not take the exact process as is required of store owners. Thanks to the new developments this year, business sales tax is now a vital tax requirement for e-commerce businesses. Many states have announced changes to their online business sales tax laws.
This will, therefore, result in more complications especially for e-commerce businesses who have customers across many states in the country as different states have different fee structures. Some states may not require business sales tax on very small items while others may have a flat rate placed on tax. Some states may exempt certain items from taxation while others will charge additional business sales tax.
To help you avoid mistakes due to the recent changes with business sales tax, here are some tips with regards to collecting business sales tax.
Typically, when your business has a physical presence or “nexus” in a state, you are obligated to collect business sales tax even when you have online customers in that state. However, with the new laws, you do not require having a business facility before you can collect business sales tax.
Different states have redefined the meaning of the ‘nexus” or connections, but the most basic meaning is that, if you sell online and distribute products and services to other states even when you are not located in them, you may have created connections with these states.
As mentioned above, every state has its own set procedures and rules for business sales tax. Therefore, as an online business with different “connections,” you may have to deal with different due dates, formats, filing frequencies and many more. Therefore, you must ensure that you get it right for each state by staying updated with the current requirements which may also change soon.
A lot of states may require that you provide a breakdown of your collections for business sales tax. Therefore, it is imperative that you cross-check all documents and figures before remittance.
Many online sellers may think that if they do not collect the tax, then they are not required to file for it for that period. This is a risky decision as many states would expect that you file within specific periods even if you collected nothing. Failure to comply may mean harsh penalties and steep fines.
You should avoid business sales tax compliance mistakes at all cost, primarily as an e-commerce business. The best approach to doing so begins with keeping your business financial records meticulously. Also, make sure you continue to monitor the business sales tax regulations within the coming months as more rules may be created anytime in the future.
We are always here to help. All you need do is contact us at (212) 320-8191 or by email at firstname.lastname@example.org.
Urgent Tax Services
6009 16th Ave,
Brooklyn, NY 11204
Ph. (212) 320-8191
Fax (646) 626-6447