Q4 has begun and the clock is ticking for most eCommerce sellers. Between the surge in sales and the wish to spend more time with your loved ones, most sellers find this quarter to be the most rushed of the year. Before the tide of the holiday surge comes in, let’s take a few minutes and go over three ways you can put your sales tax compliance in order right now to make closing out the year-end a little more simple.
1. Make sure you are collecting sales tax from customers in the right states
The basic idea behind sales tax compliance is that you are required to collect sales taxes in states where your business has nexus. Sales tax nexus is a fancy way of saying your business has a significant presence in that state. You’ll always have nexus in your home state, but you can have nexus in other states where your merchandise is stored in warehouses, where you sell at conferences or festivals, or states where you may have a remote employee.
If you find that you have nexus in an unexpected state, you’ll want to register for a sales tax permit for that state before you start collecting. Once your permit arrives, you will need to set up your shopping cart settings to ensure you are collecting from buyers in that state.
2. Ensure you aren’t charging sales tax on non-taxable products
Many states do not tax groceries, and others don’t tax clothing. There are several types of products you have keep an eye on to determine which states consider them taxable.
Here’s an example. If you sell textbooks, you should know that in Kentucky, textbooks are non-taxable and your penny-pinching student customers there will not appreciate it if you charge them sales tax when you are not obligated to do so by the state.
Fortunately, most only shopping carts or marketplaces will allow you to specify which products are non-taxable. Entering the right product code for your SKUs makes sure the right amount of sales tax is withheld every time.
Collecting sales tax is a bit like walking on a tightrope for sellers–if you collect more sales tax than you are allowed, you’ll have unhappy customers, but if you err in the other direction and do not collect enough sales taxes, you could be on the hook to make up the difference out of your own pocket. Different items are taxed at different rates, and these rates can also change at any time. Setting up your online shopping carts or marketplaces ahead of time takes away the guess work.
3. Automate your sales tax compliance
If you really want to simplify sales taxes, let a robot do all the math and filing for you! That way you can spend the rest of Q4 shipping out products and spending time with with your loved ones rather than hanging out with your spreadsheets. If you have better things to do than file returns, set it on autopilot with a sales tax automation software.
If you have any questions, feel free to start the conversation below in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!