Taxes are quite overwhelming for a lot of people; however they are crucial for managing any successful business enterprise. In order to ensure that you are filing your taxes in an efficient and correct manner, it is crucial that you understand the various rules that pertain to sales tax filing. In this small article, you will learn about the simple basics that will help online business owners to pay their sales taxes.
What is the e-commerce sales tax?
IT is vital that you learn from the basics of the e-commerce sales tax. The sales tax is basically a very small percentage of your sale that is tacked on to a sale by online retailers. The sales tax is a form of the consumption tax which means that consumers require paying only sales tax on certain taxable items when they by those from retail stores.
Currently, there are 45 states in the USA along with Washington DC that impose a sales tax on consumers. In addition to this, a lot of states allow their local areas like cities or counties and even specific tax districts to impose an additional sales tax. As a result of this, you will find several areas in the US that have a lot of complicated combined sales taxes.
The Sales tax is strictly controlled by the state administration and there are no specific national sales taxes in the US. As a result of this, online sellers can often find themselves having to deal with various different types of sales tax rules and regulations with regard to the different sales taxes in various different US states.
Can you charge a sales tax on ecommerce sales?
For online retailers, it is essential to understand that they are solely responsible for their sales tax in their states. It is wholly their responsibility to charge their buyers the proper sales tax amount and then remit it back to the state. Hence, it is important to understand when online sellers can collect sales taxes from their customers. The main principle here is that:
- Your business should have a sales tax nexus within the same state as your customer.
- The specific products are taxable in that specific state.
What is the sales tax nexus?
The sales tax nexus is simply another way of conveying a significant connection with the state. In case you are an online seller and you have nexus in the state, then the state shall consider you to be liable for charging sales tax to the buyers of that state. You will always find a sales tax in your state and certain businesses have sales tax nexus in other states also. The various ways by which a sales tax nexus exists in different states is as follows:
- A physical location: either an office, a warehouse, a store, or any other physical presence of your business.
- Online Personnel: employees, a contractor, a salesperson,
- Inventory: A lot of states consider having a stored inventory within the state in order to cause nexus even when you have got no other place to run a business or keep your personnel.
- Affiliates: These are people who make advertisements for your products and get a percentage of the profits in return.
Condition of the Sales Tax Nexus in different States
A lot of states’ nexus include terms like “doing business” and “engages in business.” These terms help the nexus to stay compliant.
Taxability of the products
All types of personal property which is tangible like toothbrushes, tables, and chairs are taxable. However certain states have some specific exceptions in place, like clothing is an untaxed product in Pennsylvania. Similarly, in Illinois, there is a sales tax charge of 1% on certain specific grocery items. This means that if you have a nexus in the state of Illinois and you sell grocery items then you will have to charge 1 percent sales tax on grocery instead of the general Illinois sales tax rate of 6.5%.
You can use an online sales tax calculator to help you calculate your sales tax amount accurately and correctly.
Conclusion
Sales tax is an economic liability that e-commerce and online business owners need to work with and return. Hopefully, the information mentioned in this article will have helped you.