What are Some Important Ecommerce Sales Tax Guidelines to know about?

What are Some Important Ecommerce Sales Tax Guidelines to know about?

You need a proper idea of pricing in order to run a business successfully. You need to sell services and goods at a cost that consumers wish to pay, and which satisfies the financial requirements of your business. Unlike earlier, the sales tax submission process has become much more complicated for businesses. Find out about the guidelines for ecommerce sales tax submissions.

Consider the states for collecting tax

You should collect taxes in any state that you have customers in, as of June 21, 2018. Prior to that date, there was “sales tax nexus” – a set of criteria in every state that determine whether you need to collect taxes in the state. The criteria comprised of things like the total sales value, location of sales rep or distributor, actual location in the state etc. But those rules have changed now. It is not necessary to be physically present in the state, as per a decision of the Supreme Court favoring South Dakota.

Determine the taxable products

Consider which of the products actually qualify as taxable items. The rules, again, differ across states. A few items, that are commonly non-taxable, include digital products, subscriptions, magazines, non-prescription and prescription medicine, some types of books, clothing, grocery food etc.

Sign up for sales tax permits in state

You have to apply to the Department of Revenue in every state you wish to collect sales tax in, to obtain a sales tax number. This number is required for collecting tax legally from customers. Note the due dates for tax submission in each state. You need to file taxes annually, quarterly or monthly. You have to include the information along with the tax permit sent by your state. Your sales tax permit, in the majority of states, also acts as a resale certificate and allows product purchase tax-free as long as the items are intended to be resold.

Update the shopping cart of your website for sales tax collection

This is among the most important small business tips. In order to make sales in the state you are located in physically, check whether destination-based taxation or origin-based taxation is used by your state. In Destination-based taxation, you charge costs applicable to the shipping address. On the other hand, in origin-based taxation, you charge the city, county and state rates applicable to the area that you are shipping from.

It is also possible to charge the rates applicable. Shipping charges are taxable in a few states. The majority of shopping carts let you add this feature. While using drop shipping, you need to take a decision along with your drop shipping supplier about the one who will assume the responsibility for sales tax collection.

Filing your tax return

You have to file tax returns for each state within each due date, even in case of no sales in a state in a financial year or period. In case you do not file, you might have to face a penalty. There could even be risks of a loss of eCommerce tax permit. With a tax automation software program, you can make the submission process easier for you.