Correct Amount of Sales Tax?
Calculating, reporting, and remitting sales taxes can be challenging. Fortunately, SalesTax DataLINK can help. All these tasks can be automated with a very high level of accuracy and convenience for one predictable price with our sales tax compliance solution.
But are you collecting the correct amount of sales tax in the first place? You are responsible for the full amount you should have collected, no matter how much you actually collected.
What’s more, if you collect more than you are required to, you are responsible for paying your customers back. If you sell airplanes, that might be feasible. If you sell something smaller, tracking down the transactions with errors and returning the correct amounts will be well-nigh impossible.
The first issue to be aware of is nexus. Before the Supreme Court’s Wayfair decision in 2018, a business was only required to collect sales tax in jurisdictions where it had a physical presence. If you had a warehouse, a store, or a physical office in Massachusetts, you would have to collect and remit sales tax.
Now, you can have nexus in places where you have no physical nexus. Economic nexus, cookie nexus, and other even more exotic definitions of nexus mean that many businesses have nexus in lots of places. It’s essential that you identify all the jurisdictions where you have nexus and register to collect sales tax in every state where you meet the threshold.
Next, you need to determine whether your products and services are taxable in the states where you have nexus. You might think this would be easy, but in fact, it is not. Not only do different states have different rules about what is taxable and what is not, but they also have different definitions.
Your product might be classified as groceries in some states and not in others. If it is classified as groceries, it might be taxable at different rates from other products. Sales taxes on specific items including groceries are sometimes exempted on a temporary basis, too. It is not possible to assume that the definitions or rates that are current in the state where your business is headquartered are also in use in any other jurisdiction.
Wait — there’s more!
Some states require sales tax to be collected on the total including shipping costs. This also can vary from one jurisdiction to another. And don’t forget that jurisdictions include not just the states and territories of the United States, but also counties and cities.
How do you know how much to collect? Obviously, it is not easy. Online e-commerce tools do not automate all these decisions.
If you haven’t used Sales Tax DataLINK
You will be pleased to discover that Sales Tax DataLINK can help with these issues.
Try Sales Tax DataLINK. We’re affordable, and accurate, and we have American CPAs who will help you any time you need support. Call 479-715-4275 and let us impress you.