If you are like most people, thinking about tax paperwork may fill you with dread. For online sellers on marketplaces like Amazon, Walmart.com, and even your own e-commerce sites, calculating and filing sales tax can be overwhelming.
This article provides some basic tips to help you start to tackle your sales taxes for your digital commerce business.
- Determine where you have a sales tax nexus. This is a function of your physical business locations, personnel locations, and inventory warehouse locations.
- Determine where you have economic nexus. Even if you do not have a physical presence in a state, if you pass the economic threshold for total revenue or transactions in a state, you are legally required to collect and remit sales tax to that state. TaxJar offers a free tracking tool that will alert you when your online sales in a state crosses an economic tax nexus.
- Some items are exempt from sales tax, such as grocery food and some apparel, but this list varies from state to state. You can find the detailed list in each states’ sales tax regulations.
- Amazon can help collect sales tax on your behalf in those states that have active marketplace facilitator laws so long as you set up your account to reflect sales tax. Amazon will automatically account for sales tax exemptions if you classify your products using their product code, and keep track of sales tax holidays! However, your business is still liable for collecting on sales from other platforms, such as on your own website.
HINGE GLOBAL’s strategic partner, TaxJar, has helpful resource materials available. TaxJar also offers a software solution that can automate your sales tax calculations, reporting, and filings for your business on Amazon, Walmart.com, Shopify, Magento, Etsy, and other platforms. Depending on the size and complexity of your business, this solution may be worth exploring to simplify your life come tax time.
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