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.
Compliance
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.
The Solution
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.
Avalara will:
- 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
Next Steps
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.
