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Online Sales Tax in 2021 for Ecommerce Businesses

By February 1, 2021February 17th, 2021No Comments

eCommerce may sound too unnatural, especially when we’re talking about taxes! Every novice eCommerce seller knows that feeling when they sell products online, but somehow don’t feel that they have real customers or real buyers… The reason for this is the nature of eCommerce in general. A vague and intangible sphere like eCommerce always gives the feeling of freedom: freedom from taxes and other stressing factors that have always existed in our reality.

Is It Something New?

There’s a type of tax that is popular among eCommerce sellers, and it is called -drumroll please – sales tax! This is a consumption tax that has always existed, even when eCommerce was not here with us! The first sales tax was invented during Great Depression, during the hardest and pitiless times!

Intro

Now that you’re an eCommerce seller you should certainly know that if you want to have your own eCommerce store, you will have to pay Sales Tax. Just like you, our clients are always surprised when it comes to this type of tax, especially when the sources they acquire their products from charge them Sales Tax! And now, to make your life easier and better, we will explain what a Sales Tax is, who should charge it, and how sellers can “legally avoid” paying it.

Is Sales Tax The Same For All States?

Nope! Sales tax is regulated with the help of the states. This means that each and every state has its own sales tax laws, and system, and if you want to have an efficient and cost-effective business, you should do your research before selling anything in this or that state! Sales tax laws can make or break you, and in this case, you can take the situation in hand, and decide your future!

Everything is different when it comes to states, even the products that are taxed in one state can suddenly become non-taxable in another. If you have questions about taxed products, and everything related to Sales Tax, contact us!

Which Products Are Taxable?

It’s easier to say which products are taxable! In general, the majority of tangible products are chargeable, which means almost anything you can see and touch will require sales tax. In other words, if you want to start an eCommerce business and have decided the products you are going to sell, you are most likely to deal with such a thing like Sales Tax.

Should I Collect Sales Tax?

If you’re already confused and started hesitating, then you’re on the right track! Let’s break it down this way: you’re an online retailer, and you should pay to the government everything that you collected. But how, when, and from whom should you collect Internet Sales Tax? That’s the question! But wait, don’t panic! We will help you with your tax-related issues, just keep reading and you’ll see everything yourself!

In other words, there are certain requirements that you need to follow in order to charge Sales Tax. You should:

  • Have Sales Tax Nexus in the state where your customer is
  • Make sure the product is taxable in the state you’re operating the business

Wait, What Is Sales Tax nexus?

The connection that your business has with a taxing authority is defined as your nexus. This means that if you somehow don’t have a sales tax nexus, a taxing authority won’t be able to impose its tax laws on your business.

Here are the main Sales Tax Nexus requirements by states:

Product Taxability

Each state pays attention to the product: is taxable or not? Do not forget that there are both taxable and non-taxable products, make sure you do your research and only then start your sales tax-full journey! If the product that you intend to sell is taxable in your state, you should register it for sales tax permits.

Permission: Don’t Let Buyers Pay Sales Tax to Fraudsters!

if you need to register your product, you should work with the Department of Revenue. To do so, they will require information on your business activities which is a very important step, so make sure you provide the right info! Don’t forget that a business can be penalized for collecting sales tax without permission! In this case, approval from the government of your state is exactly what the doctor ordered!

Remember, you need to register for sales tax permit. Otherwise, you will make your business a fraudster who claims to have a permit, collects sales tax and in the end, keeps all the money to itself. As you can see, sales tax permit is not only a necessary document on the governmental level, it’s also a paper that defines you and your business’ reputation. Collect sales tax legally, and don’t let innocent customers pay sales tax without even knowing that they pay to a dishonest company.

Charge Sales Tax

Now that you have made all the steps to identify your products “taxability”, and to register them, you can start the process charging sales tax!

Who Invented Sales Tax?

Studies have shown that Sales Tax is a good way to increase the revenue. States, of course, don’t use sales tax randomly. They have a special strategy and know which part of the sales tax portion will be paid and to whom.  More precisely, Sales Tax revenue helps state, country and local municipalities develop their communities.

Conclusion

Now that you know how to collect sales tax, go ahead and do what you have to do in order to help your state, and of course, your business. If you have questions about sales tax, or are a seller who wants to avoid (legally) paying this type of tax, simply contact us! Our sales tax specialists will explain to you your rights, and further steps that you need to take in order to properly deal with sales tax! Good luck to you and your business in the process of working with taxes, we believe in you!

Guest Writer

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