If you’re an e-commerce business, you know the pain and suffering involved in managing sales tax. Each state, and in some cases different counties within a state, have differing tax laws. Taxes can vary depending on the county in which you are selling!
The E-Commerce Nexus
States determine sales tax liability by using an economic nexus*. Some states require a physical presence in their state for sales tax to be collected, others do not. In Ohio, for example, a business that has gross sales exceeding $100,000, or has 200 more separate transactions in a calendar year, must collect and pay or charge sales tax.
On the other hand, Illinois is an origin state if you are an in-state seller. It is a destination state if you have nexus, but no Illinois location to sell from. This is a use tax, and only the state rate is applicable.
Other states will charge sales tax if you use drop shipping programs like Fulfillment by Amazon, sell items at a trade show, or have an employee working in their state.
Confusing huh? That is only the tip of the iceberg.
Non-compliance with sales tax payments and filings can be expensive, mentally challenging and time consuming. You can employ a person full-time (or multiple people if you have a lot of transactions) or use an application we found to be helpful.
Unless you want to devote countless hours to tracking, updating, and calculating sales tax for your multi-state sales you will need some help. We have done a lot of research and found an application that takes the pain out of sales tax for your e-commerce business. The application is called Avalara and it works great! Not only does it integrate with QuickBooks, it takes the guessing out of sales tax calculations for you.
- Apply tax rates and rules to your invoices
- Know when you have met the triggered nexus per state
- Validate address at the point of purchase
- File monthly, quarterly, and annual sales tax returns for you
- Ensure you are prepared for an audit
Integrating an outside application into QuickBooks can be tricky. We have a lot of experience and would love to help. Contact us at www.budgetease.biz to get started.
*What is a nexus? A central link or connection. If you happen to be at the nexus of something, you are right in the middle of it. like standing in the middle of an intersection.