Did that intro cause you to freak out a little? That means you’re one of the lucky business owners who only have to worry about sales tax on an annual basis. On the other hand, only having to deal with sales tax once a year has its downsides. Often this means you simply forget what to do when sales tax time rolls around.
Don’t worry, though, we’ve got your back. Here is a small list of your basic steps to take when you want to comply with sales taxes.
Determine Where You Have Nexus
One of the most confusing things about sales tax is determining where you owe sales tax. If you have nexus, or significant presence, in a state, you have to collect from buyers and pay up. Nexus can be created by having an office or employee in a state, or even by storing inventory in a warehouse. If you figure out that you have nexus in a state, your next step is to…
Register Your Business
Now that you’ve figured out where your taxes are due you can go about paying them. First, though, there’s another step in the way: registering for your sales tax permit.
Forty-five states and the District of Columbia levy a sales tax, and if you have nexus in any of those states, you must register. Once you’re registered, the state will tell you when they want you to file and remit sales tax back to them.
Be sure you register before you collect. Many states consider it unlawful to collect sales tax without a license!
Collect Everything You Need
Naturally if you haven’t collected sales tax from buyers already you need to amend this immediately. The last thing you want to do is suddenly find out you owe a bunch of money and have to shell out your own hard-earned cash. If you need to change your business and the way you operate on websites like eBay, Etsy and Amazon, now is the time to do it.
Now is also a good time to get all the reports you need to file. Some states just want to know how much sales tax you collected statewide, but a majority want you to separate out how much sales tax you collected in each county, city or other taxing district. If you sell on multiple channels, this can start to get very complex, very fast!
Now that you’ve gotten everything together, it’s time to file! One of the few nice things about filing sales tax in this day and age is that it’s fairly easy to do so. Most states not only have online payments available they actually require it, meaning you can pull off the action in little time.
One thing to remember is some states have “zero return” rules. Whether or not you actually collect any sales tax you have to file a return anyway just to show that you’re still in business. Only certain states have this rule so make sure you check each state you have nexus in.
Is it a little obnoxious having only one payment a year and thus forgetting everything in the meantime? Sure. But is it great basically taking the year off and relaxing as you make money? Absolutely! Enjoy the year!
As you can see, sales tax is complex. This is precisely why we created TaxJar – to handle the burden of sales tax while you run your business. TaxJar pulls in sales tax collected from all the channels where you sell, compiles your data into return-ready reports, and will even AutoFile your sales tax returns for you in many states.
Sign up for a 30-Day TaxJar free trial today and put a lid on sales tax. To let us take care of your January sales tax filings, be sure to sign up by January 5th!
Mark Faggiano is the founder and CEO of TaxJar, a service built to make post-transaction sales tax compliance easier for multi-channel ecommerce sellers.