E-commerce allows a buyer to purchase goods and services online without having to leave home. E-commerce has revolutionized the businesses who sell these products and services. One of the biggest concerns for these business owners is the assessment, collection and remittance of sales tax.
We know that filing taxes can be stressful and that stress can be multiplied for e-commerce businesses. States can apply e-commerce sales tax based either on the origin or the destination of the goods sold. Most states use destination, which means they charge sales tax based on to where the product is shipped, versus origin, which means the tax is charged where the seller is located.
Different states have different sales tax rules, making it even more difficult for those selling across multiple states. If you live and own a business in the United States, 45 States plus the District of Columbia demand e-commerce businesses assess, collect and remit applicable sales tax. The only states that do not have sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. If you have a business and operate in these states, then you will not have to worry about assessing, collecting and remitting sales tax.
Determining which state requires the assessment, collection and remittance of sales tax is based on various factors. One factor is where your business is located and if your business state requires the use of origin or destination sales tax laws. Another factor is if the business has created “a sales tax Nexus” in other states. A sales tax Nexus is essentially a way to connect the seller to a particular state. Each state’s sales tax laws vary and can be quite complicated to understand. Some of the ways to determine sales tax Nexus involves answering the following questions:
- Is your business office located in the state in question? Do you have various business locations in multiple states?
- Do you store inventory, have warehouses or salesrooms within that state directly or indirectly with affiliates?
- Do any of your employees, sales personnel or affiliates work in another state?
If you answered “yes” to any of these questions, you may have to register for a sales tax permit in the applicable states and begin collecting on each transaction. If you are unsure if you have created sales tax Nexus, we would be happy to help you.
We hope that this was a helpful guide to what sales tax considerations e-commerce business owners should address. If you have any questions, Jones CPA Group would be pleased to help.
Jones CPA Group can be your partner for all of your tax and accounting needs.
STATEMENT OF CONFIDENTIALITY:
The information contained in this electronic message (and attachments, if any) is confidential under applicable law, and is intended only for the use of the individual or entity named above. If you are not the intended recipient, you are hereby notified that any use, distribution, copying or disclosure of this communication is strictly prohibited. If you have received this communication in error, please notify Nellie M. Green, CPA, CVA immediately at Jones CPA Group, P.C. (757) 631-4760 or by return e-mail to nell@jonescpagroup.com and permanently purge the communication immediately (and attachments, if any) without making any copy or distribution.
DISCLOSURE: Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed by law.
