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Sales Tax for eCommerce Businesses

Updated: Oct 11, 2022

As the eCommerce industry expands, it has become necessary to collect and submit sales tax for all online transactions. Take a look below to see some of the more frequently asked questions around eCommerce Sales Tax.

Why are e-commerce businesses required to collect sales tax?

  • E-commerce retailers are required to collect sales tax because of the case between the U.S. Supreme Court vs South Dakota.

  • Each state has its own rules to determine which businesses are required to collect and pay sales tax.

  • E-commerce businesses should consider technologies and consult with experts when determining these rates.

  • E-commerce businesses should stay up to date with sales tax laws for each state that they do business with.

What is a sales tax nexus, and how does it affect e-commerce businesses?

  • A sales tax nexus determines the relationship between your business and the state, or taxing jurisdiction.

  • E-commerce businesses are required to charge sales tax to out-of-state sellers, which means you don’t need a physical presence in a state to pay sales tax.

  • The sales tax nexus changes from state to state, and how it’s determined can depend on several factors.

  • Where the inventory is stored, amount of product sold to, in a particular state, where the headquarters is located.

How to adjust to new sales tax laws for e-commerce?

  • E-commerce businesses need to set up a system to process the sales tax.

    • Need to determine eligibility

    • How much sales tax to charge

    • How it will be collected

    • How it will be tracked

    • How it will be paid

When is the sales tax from e-commerce businesses be paid to the sales tax jurisdiction?

Remote marketplace providers that facilitate gross sales of $500,000 or 100 transactions in the preceding four quarterly periods are required to obtain a certificate of authority, collect taxes, file returns and remit tax on all sales into the state.

Filings and payments are made either monthly, quarterly or annually.

Monthly Filings

Did this answer your questions? Did you want to dig deeper on any of the above topics? Schedule a call with Lucy for a complimentary 30-minute consultation to discuss how this applies to your business or if you’re looking for help to manage or better understand the sales tax process.

Stay tuned for an upcoming post all about the details and process of sales tax filing.

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