As a seller on Amazon, Ebay or any ecommerce platform there are a number of tax obligations, reliefs and exemptions it is important to be aware of in order to avoid penalties and paying unnecessary tax.
45 U.S. states and D.C. levy a sales tax. Merchants within these states are required to charge sakes tax to buyers.
As an ecommerce seller you are not directly paying the sales tax but are a ‘pass-through’ point between your buyers and the state and local tax authorities.
Sales tax can vary a lot from state to state.
States set a rate and then localities can add a percentage on top of those rates. For instance, in the 90210 zip code, the tax rate is the 6.5% California state-wide rate, a 1% Los Angeles Country rate and then an additional 1.5% local rate for a total of 9.0% sales tax rate.
One of example of state-to-state variation of tax for ecommerce sellers is that that some state requires you to charge sales tax on shipping charges, while others do not.
It is essential to be aware of the tax obligations within your state.
Sales Tax Nexus
Sales tax nexus refers to the sufficient physical presence that legally deems in necessary for businesses in a state to collect and pay tax on sales in that state.
The rise of online retail platforms such as Amazon has lead to states having to search for new ways to collect sales and income taxes from companies that conduct business virtually.
Determining sales tax nexus
Presence can include- but is not limited to- an office, an employee or a warehouse.
If you have sales tax nexus in a state that requires sales tax collection, then you must collect sales tax from all buyers in that state regardless of where the item is shipped. If you do not have sales tax nexus in a state, then you’re not required to collect sales tax when you sell online to buyers in that state.
Types of sales tax nexus
There are a number of examples that can be used for sales nexus. For example:
· Home state nexus
· Employee nexus
· Inventory nexus
Remitting Sales Tax to Nexus States
When you apply for your sales tax permit, your state’s tax authority will assign you ta frequency at which to file and remit sales tax. Generally, this is monthly, quarterly or annually, and often depends on your sales volume or the volume of sales tax you collect.
Sales Tax Due dates
While sales tax due dates usually fall on the 20th of each month, states due dates can vary massively.