Your eCommerce store is growing! That’s a good thing, right?
Well, for the most part, darn right it is. But as you’ve probably noticed, as your little online store grows up, so does the complexity of running it behind-the-scenes. And one of the most complex aspects of running a thriving online store is dealing with sales tax.
Today we’ll help you pinpoint some of the more onerous aspects of handling sales tax compliance in your growing eCommerce store, and what you can do to put a lid on sales tax.
Problem: You have sales tax nexus in multiple states
Let’s say that when you started your business you lived in and ran everything about your business – sales, fulfillment, customer service – out of your garage in California. Sales tax in this instance is simple. You have sales tax nexus in California and must collect sales tax from buyers in California. If you sell to a buyer in another state where you don’t have any significant connection, like Virginia, then you don’t collect sales tax. Simple, right?
But let’s say your little business grows up and you hire a salesperson in Virginia. And maybe you start storing some of your products in a warehouse in Illinois. Suddenly you have sales tax nexus in more states.
This means you need to register for a sales tax permit in these states, and set up the shopping cart you use or the platform you sell through to collect sales tax from buyers in those states.
It also means more sales tax due dates. When you only had sales tax nexus in California, perhaps you only had to pay monthly or quarterly. But Virginia may want you to file and remit sales tax annually while Illinois wants to hear from you monthly. These various sales tax due dates and collection requirements add a whole new layer of complexity to your growing eCommerce store.
Speaking of selling on more than one platform…
Problem: You sell on multiple channels
When we started TaxJar we talked to many online sellers who began selling online on a site like eBay as a hobby. They started by selling things around the house and when they realized how lucrative eCommerce could be, began to grow their businesses.
When you only sell on one platform, collecting and remitting sales tax is fairly simple. You set up your shopping cart to collect sales tax, then when a filing due date rolls around, you pull a report from your shopping cart and remit the amount you collected to your state.
But very few online sellers actually stick to just one channel. Perhaps you started selling your old junk on eBay, but quickly moved onto selling your vintage finds on Etsy and your own custom line of jewelry on your own website using a shopping cart powered by Magento. Suddenly you have three places (or more!) to pull sales tax reports from when it comes time to file.
That’s not to mention that some states require you to break up the sales tax you’ve collected by city, county or special taxing district.
Trying to figure out how much sales tax you collected on each platform, in each taxing district over the correct period of time (monthly, quarterly or annually, remember) can turn into a spreadsheet-induced nightmare!
So what’s a thriving seller to do?
Solution: Sale Tax Automation
Fortunately you aren’t alone in your battle against sales tax complexity. Automated sales tax solutions like TaxJar are here to help.
An automated sales tax solution can integrate with the various shopping carts and platforms that you sell on and pull in all the sales tax you’ve collected.
It then breaks down your reports by state and taxing district, so no more frustrating spreadsheets! When it comes time to file sales tax, all the information you need to file – included a breakdown by city, county or other necessary taxing district – is all right there at your fingertips. Even better, TaxJar will AufoFile your sales tax for you in 26 states (and counting!) You can set it up one time, and forget it so you can get back to doing other things – like helping your business thrive!
Has sales tax complexity held your business back? Do you have any questions about eCommerce sales tax? Start the conversation in the comments!
Mark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for eCommerce sellers. Mark’s passion is solving complex problems for small businesses. He previously cofounded and led FileLater to become the web’s leading tax extension service for both businesses and individual taxpayers before being acquired in 2010.