Sales Tax Process for eCommerce and Brick and Mortar Shop Owners

The full sales tax process involves many steps which must be managed monthly, or even several times a month. The process includes:

1. Determine and monitor sales tax nexus on a state-by-state basis (the state of the buyer for eCommerce, the state of the seller for a brick and mortar)

2. Manage various exemption certificates

3. Register and renew sales tax IDs in the states in which you have an obligation

4. Prepare and file sales tax returns based on filing frequencies (monthly, quarterly, annually)

5. Pay respective jurisdictions where you are registered to collect and remit, also maintain a paper trail to include proof of mailing and payment

6. Maintain documentation in the event of turnover or a change in personnel

7. Create bandwidth to address all customer questions and internal business questions related to sales tax

8. Manage sales tax audits and respond to nexus questionnaires issued by the jurisdictions

9. Maintain an accurate tax calendar to include changes in filing frequencies, filing methods, and changes in payment methods.

The sales tax process cycle and steps:

Register in State

Product/Service Sales

Collect Sales Tax

Prepare Sales Tax Return

File Sales Tax Return

Remit Sales Tax Due

As you can see by the steps above, the sales tax process in the e-commerce industry is very daunting and time consuming. Sales tax rates differ from state to state where you have a sales tax nexus. If not set up properly in the beginning, it can be confusing and cause potential penalties. If you’re starting the process or need to address sales tax for your online or brick-and-mortar store, consider reaching out to a professional who can handle the workload for you with greater accuracy, and in less time.

Contact Plus 1 Bookkeeping for a complimentary conversation.

BUSINESS FINANCIAL YEAR END PREP LIST

As the year comes to a rapid end, it’s important to be ready for the closing of your financial year. This is also a good time to review your year to date activities and profitability. It’s also a good time to plan for the future. Knowing what financial position you’re in at this time is crucial for planning ahead. You may have plans to increase salaries, buy new equipment, or plan to increase rates. Several steps have to be taken before you can make these changes.

Your trusted bookkeeper will need these items in order to perform the year-end process.

1. Bank and Credit Card Information: online sign in credentials

2. Statements: Bank, Credit Card, Loan, Line of Credit

3. Invoice Lists and POS monthly reports

4. Previous Tax Return

5. Sales Tax Returns

6. List of Uncleared Funds

7. Fixed Asset lists: any furniture, equipment, vehicles bought during the year

8. Run a list of all customers with balances

9. Run a list of all vendors with balances

10. Gather all Form W-9 from Subcontractors: Request for Taxpayer identification number

Now is the time to reach out to your Accountant, Bookkeeper, and Tax Consultant to prepare for year-end review and planning.

You can reach out to Plus 1 Bookkeeping to assist you with organizing your financial data. Here’s a link to make an appointment:

Schedule your complimentary call

Sales Tax for eCommerce Businesses

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.

Schedule a complimentary call

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