ECOMMERCE SALES TAX: The basic fundamentals of an eCommerce business are quite simple, all it involves is the purchase and selling of products over the internet. There are several administrative hassles involved in eCommerce which are not that simple, however. These administrative issues can give rise to several difficulties which can cause a lot of troubles to business owners and one of the most profound trouble, in this regard, is that of the sales taxes.
In this article, you will learn about the various essential details that an eCommerce firm needs to consider in order to properly calculate their sales tax amounts. Sales Tax Services
Dealing with Sales Tax
Sales tax is basically a transaction tax. It is a tax that is paid by the consumers and then collected by the retailers who will keep the trust until the required sales tax return as well as the correct tax collecting authority for tax collection. There will also be remittances. There is no specific federal and national sales tax policy in practice within the United States. Instead, the regulations are varied according to the different states:
- 45states along with Washington, D.C. have specified state sales taxes.
- 37states have an additional local sales tax (this includes Alaska, which does not have a state sales tax).
- 6 states have a policy of following the home rule (Alabama, Alaska, Arizona, Colorado, Idaho, and Louisiana), this means that the different cities and counties, or special tax jurisdictions are able to collect and also administer sales tax in an independent manner.
- 5 states have no state sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon, or the NOMAD states).
Including all of these, there are more than 13,000 separate sales tax jurisdictions in the United States. And each of them has its own rates and limits. The reporting codes for all of them are also different.
Complications of Sales Tax
The vast number of separate jurisdictions is the main reason why the sales tax procedure is so complicated. Compliance with sales tax regulations can be quite taxing. The rate of the sales tax, the rules of the product taxation, and various other regulations differ from state to state. At times, the rules are different from one city to another within the same state also. The companies which have an obligation of collecting their sales tax from multiple states have to comply with all the pertinent laws from different states.
Who should collect the Sales Tax?
If you need to collect the sales tax in your state will depend mainly upon the nexus. The nexus is a link between the taxing authority and a certain business. Thus, this means that the state will not be able to force a business to remit sales tax if the business does not have nexus within the state. However, business ventures are also mandated to have their registrations done in a nexus and follow the necessary sales tax regulations.
Presence of the Nexus
The physical presence of the Nexus is important in this jurisdiction. Which means having a physical office, like the physical presence of a business entity. However, there are more complications, such as travel salesmen or e-commerce agencies. What to do even with people who have their own business online. Different states follow different regulations in this regard. The rules and regulations depend on time. That currently sales goods are required to reach the consumer or sales representatives to reach the presidency, for example:
- One day in Colorado or Texas
- More than two days in a single year in Arizona
- At least about four days in a year in Minnesota
Calculating sales tax is quite time-consuming. You can hire a professional state sales tax calculator to help you solve your eCommerce project tax issues. You can find several good tax advisors on the internet.
The necessity of complying with the state sales tax regulations is essential to maintain a business venture legally. However, for e-commerce business owners, there are many complexities involved in calculating sales tax. Because it is important to evaluate different products according to different operational locations. As a result of this, it is important to hire professionals tax advisors for calculating your taxes.