You need to do many things to keep your business in good health, and staying compliant with the various laws and regulations is one of the trickiest. Mainly if you are an eCommerce business selling to multiple states and need to comply with sales tax. Why is this so difficult, and how can you ensure you stay compliant?
Understanding the Changes to Sales Tax Compliance Regulations
Following the case of South Dakota Vs. Wayfair, in which the Supreme Court ruled for a dramatic change in tax law precedents and a new definition was established for the economic nexus, there was a lot more that retailers and eCommerce businesses needed to consider.
Before the ruling, the economic nexus only covered a company’s physical presence in a particular state regarding whether they were liable to pay sales tax. However, after the Wayfair case, if a business sells its goods in any of the 50 states in the US, even if they do not have a physical presence and involves online transactions, it may still need to register in a specific state and collect sales tax when the economic nexus threshold has been exceeded.
What Makes Things So Difficult?
The difficulty with the rule change is the nexus thresholds for different jurisdictions; you need to be aware of the thresholds in each state you sell your goods and services. This is even trickier considering the number of businesses that rely on drop shipping these days.
What Can You Do to Stay Compliant?
Suppose you are a digital retailer or eCommerce business. In that case, you need to rely on indirect tax software tools or the help of an accountancy firm like BSH Accounting to ensure you are always compliant with the economic nexus laws and the sales tax requirements for specific states.
There are questions you need to ask yourself as an online eCommerce business owner:
- What products are you selling?
- Where are the products being shipped from?
- Who is collecting the sales tax?
- Where is the sales tax due?
- Where does the company have economic nexus?
- Where does the drop shipper you use have economic nexus?
- Where are the customers located?
- Can exemption certificates be applied?
You must review your sales data to determine the potential filing requirements. You should check taxability laws in states you haven’t addressed before and determine if any exclusions or exemptions apply. While some services and products are taxable in one state, they might not be taxable in other states.
To navigate the tricky landscape of sales tax compliance, you should hire a company like Avalara. They can help you with the registering and filing of sales tax returns and help you collect sales tax from customers, connect with Quickbooks Online, and have them automate this process. After that review, your company should pause to determine if you should register and state sales tax collection or be fine for not registering and collecting. You can Contact Us directly for more information about how we can help you stay compliant.