Keep Track Of Sales Tax With An App
So, how the fuck are you supossed to keep track of all this?
Good news, my friend theres an app for that!
Essentially, what the apps do is monitor your sales to each state and alert you when its time to start collecting the taxes. They can even help you register for a resellers permit in those states once you meet the threshold. They will also remit the taxes for you as well so you dont have to worry about it.
In full transparency I am an affiliate of Tax Jar, and if you choose to use them would be so grateful if youd use my link. Small commissions like that help me continue to bring you kick-ass free content to help you run your eCommerce business.
They both work with multiple eCommerce platforms but Avalara only works with Shopify Plus. So if youre on any of the lower Shopify plans, youll want to use Tax Jar.
Their pricing structures differ a bit, with Tax Jar being a more standard pricing structure based on the features you want, with a 30-day free trial. Avalara is based on your sales volume so you have to contact them for rates.
Send Sales Tax Return And Payment To The State
The last step is to submit your sales tax return to the state, along with the actual payments youve collected from customers. If you use accounting software like QuickBooks, you can set it up to have sales tax payments automatically post to a separate account.
Due dates for filing sales tax vary a lot based on which state you transact in. The deadline usually falls on the 20th or 25th day after the reporting period ends. Some states require you to report and pay sales tax each month, whereas others are on a quarterly or yearly cadence. Often, the reporting and payment schedule is more frequent for higher volume sellers. Fortunately, most states make it possible to report and pay your taxes online.
Even if you have no transactions during the reporting period, you should still submit a sales tax return in any state where you have a tax permit. Failure to do so can result in a fine or even having your sales tax permit revoked.
Remember to find out your states deadlines, and stick to them. About half of the states with a sales tax will let you keep a small portion of the sales tax collected when you pay on time. This amount is generally only 1%-2% of the sales tax you collected, but itâs free money!
If you dont want to remember deadlines, consider enrolling in an automated tax filing service, such as AutoFile from TaxJar. They will file your sales tax returns for you on time for a monthly subscription fee.
What Taxes Apply To The Sale
There are five general sourcing rules that determine where a sale takes place and what taxes are due.
General sourcing rules have an order. Start with rule 1. If it does not apply, go to rule 2. When rule 2 does not apply, go to rule 3. The majority of sales fall into rule 1, 2, or 3.
The sales price is the total of all charges that are part of the sale. If the item or service is taxable, these items are also taxable. Examples include:
- retail price of a good or service
- fabrication labor
- taxes that are the obligation of the seller
- tips added to the bill by the seller
- service charges
Some common situations where you may owe use tax include:
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To Verify The Tax Rate For A Location:
- Find a list of the latest sales and use tax rates at the following link: California City & County Sales & Use Tax Rates.
- You can look up a tax rate by address
- Visit or call our Offices
- Call our Customer Service Center at 1-800-400-7115 . We are available to help you 8:00 a.m. to 5:00 p.m., Monday through Friday, except State holidays.
How To Remit Provincial Sales Tax
Businesses can remit PST using the online service SETS
At SDG Accountant, our accountants are trained to help clients with GST/HST and Provincial Sales Tax returns. We can help claim the input tax credits to help your business get a sum of money back. For more information, for assistance or book a free consultation.
The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situations.
Sami GhaithCPA,CGA, MBA
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Pay Sales Taxes To Your State
Check with your state to see when you must pay the sales taxes you’ve collected. The frequency of payment depends on the volume of your sales. In most states, you must pay monthly if you have a high volume of sales, but at least quarterly in almost every state. Be sure you pay on time to avoid fines and penalties for late payment.
Some states give a discount for prepayment of sales taxes. This is definitely something to look into if possible.
For more information, see this article with answers to common questions about sales taxes.
Do I Need To Collect Sales Taxes
If you own, or are starting, a small business, its vital that you understand your tax obligation, or it could lead to serious trouble, including fines. The tax collection and payments should be part of your business plan, and part of the homework you do when you set up your business.
If you sell online and have customers from other states, this can get tricky. It can end up costing you money if you dont know and follow the rules.
To get started on the sales tax journey, and what role your business plays, you should be able to answer these questions:
What is your sales tax nexus? Nexus is where your business has a presence, but like all other things sales-tax related, its not that simple. Its always in the state where you reside and conduct business, even if youre doing it from your kitchen table, but it extends from there. If you have more than one physical location, particularly in different communities or states, affiliates, or more, that is part of the nexus. Some states also count employees who work remotely in another state, or contractors. Warehouses and distribution centers count, too. If your business sells online to other states, it may have an economic nexus .
Does your state or local jurisdiction require you to get a license to sell or sales tax permit? Start by registering with your states taxing agency. Find out, too, if you must register in other states you do business in.
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How To Use This Us Sales Tax Map
Remember that within each category of services, states can still have drastically different regulations. For instance, both Florida and Iowa are marked as taxing business services, even though Iowa taxes a wide range of these services and Florida only taxes security and detective services.
For more details about the specific tax liability of your business in individual states, consult state Departments of Revenue for additional information.
Report And File Sales Tax
When they issued your sales tax permit, your state assigned you a sales tax filing frequency.
This means your sales tax due date will roll around either monthly, quarterly or annually
Keep in mind that every states sales tax due dates are slightly different.
Most states want to hear from you on the 20th day of the month after the taxable period, but others want to hear from you on the last day of the month, or the 15th, or the 23rd, etc.
When your due date rolls around, your job is to report how much sales tax youve collected in each state.
If the state just wanted to see one number, your job would be easy.
But to complicate matters, most states want to know how much sales tax you collected from buyers in each taxing jurisdiction.
This means figuring out how much sales tax you collected in each state, city, county and other special taxing jurisdiction in all of your nexus states.
This process becomes especially painful if you sell on multiple channels, and have to attempt to integrate more than one sales tax report.
Fortunately, we live in a time where ecommerce sales tax software automation technology exists to make this process simple.
TaxJar is one sales tax automation app you can use within the BigCommerce dashboard.
Once youve reported how much sales tax youve collected, your next step is to file your sales tax return and remit the sales tax youve collected from customers.
There are a couple of important considerations here:
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How To Collect Report And Pay State Sales Taxes
If your business sells a product or provides a service that is taxable, and if you are in a sales tax state, you will need to set up a process to collect and pay sales taxes and file sales tax returns periodically.
If your business is selling in Alaska, Delaware, Montana, New Hampshire, or Oregon, no sales tax is charged, so you don’t have to worry about this process. Lucky you.
File Your Sales Tax Returns
Once you have your Certificate of Authority, you must file your sales tax returns and pay any tax due on time. Generally, we must receive your tax return within 20 days after the end of the tax period. Even if you dont owe any tax, you still have to file a return.You can file sales tax returns and make your payment electronically by creating a Business Online Services account. Simply create your account, report your tax information online, and make a payment directly from your bank account. Most vendors are required to use Sales Tax Web File.
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How To Pay Sales Tax For Your Small Business
Knowing how to pay taxes for a small business is complicated and, with the continually changing world of sales tax regulations, can quickly lead to a headache.
Understanding the basic rules of sales tax, avoiding some common stumbling blocks, and finding a comprehensive tax solution to help you move forward, will bring continued success and growth, no matter your industry.
Collect Sales Taxes From Customers
After you have received your sales tax permit, you can begin collecting sales tax from customers. You must show the tax amount separately, so the customer can see the amount of the tax this typically isn’t a problem, since most sales receipts are programmed to show the amounts. If you are selling online, your “shopping cart” page will show the sales tax calculation. You will need to program the computer for the applicable sales tax amount or amounts or start using the services of an online sales tax service.
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Should I Charge Sales Tax On Everything
It may be tempting to look at the complicated tangle of sales tax rules and just decide to charge sales tax on everything. Thats not a good idea either for your customers, who may not appreciate being charged tax for something they shouldnt be, or for your business, which could be fined for charging unnecessary taxes or even be charged with tax fraud.
While it may take some work to figure out what sales tax rates to charge for the different services and goods your business offers, it pays off in the long run.
Start with your states revenue department to determine what should be taxed. There are important distinctions to sort out.
For instance, say you have a small shop that sells homemade jams, jellies, maple syrup, nuts, candy, home-brewed wine and baked goods, as well as hand-made toys and crafts. You have a bricks-and-mortar store, but also sell online.
While food is considered a necessity and generally is not taxed, 15 states do charge taxes in a variety of ways. Some charge taxes on all groceries, though most at a lower rate than other retail items.
For the sake of argument, well say your store is in Maine. While Maine doesnt tax groceries, there are many exceptions.
So, the food and drink items you sell from your brick-and-mortar store in Maine are subject to a 5.5% tax. The non-food items are subject to an 8% sales tax.
Thats just one small example of how a small business owner may have to understand a wide variety of sales tax differences.
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Avoid Paying Sales Tax On Certain Items
Vendors who purchase products to resell can apply for a resale certificate. A resale certificate allows the business owner to buy certain products without paying sales tax on that product. The vendor then gets to charge the consumer the sales tax at the time of purchase. This way, the vendor doesnt endure the cost.
A resale certificate also applies to vendors who purchase items that theyll use to manufacture their products. For example, if a company buys wood from Home Depot to build a headboard for a client and sells that product to the client, it will be considered as a resale.
However, if a seller doesnt sell the product and uses it for personal use, it must be recorded. In which then, the seller must pay taxes on it.
Feel free to contact me via for services regarding applying for a resale certificate.
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When And What Sales Taxes You Should Charge In Canada
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If youve purchased anything in your lifetime a television set, a pair of shoes, or a coffee machine youve had to pay sales tax. Remember when you bought that t-shirt from your favourite store? The price tag listed the item as $24.99, but the final price came to a higher amount. This is because the t-shirt was subject to sales tax.
If you own a small business, sales tax is an essential part of your operations. But there are different kinds of sales tax and many rules and regulations outlined by the Canada Revenue Agency that vary depending on the province the customer is buying, or how much revenue a business brings in annually. Its important for business owners and consumers to understand how sales tax works so that they understand their purchases more, and avoid any problems with the CRA when tax time comes in March. Lets take a look at the basics.
How To Charge Your Customers The Correct Sales Tax Rates
So you get that as an eCommerce store owner, you need to be sales tax compliant. This means that in the United States specifically, you have to charge sales tax to buyers in states where you have nexus. All states have a slightly different definition of nexus, but most of the time states consider that a physical presence or economic connection, based on sales into that state, creates nexus.
Even after you have done the research to understand where you have nexus, then how much do you charge? Does it vary from customer to customer? And why does this have to be so complicated?
And more importantly, is there a solution that can automate everything so WooCommerce customers dont have to deal with any of this? The good news is, yes there is!
First, well explain a bit about how sales tax works, and then well show you how you can use TaxJar to automate the entire process so you never have to stress about sales tax again.
While determining the right rates to charge can be tricky, a little reading will help you wrap your head around it in no time. Today, well explain the different sales tax rates in the United States, and help you figure out which rates to charge your customers.
If youre a growing eCommerce business with multiple sales channels , and want to take advantage of fully automated sales tax and filing services, we recommend you choose TaxJar.
Lets get started.
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