The wonderful world of ecommerce has made buying and selling an enjoyable and convenient experience for decades now. As history has proved, virtually no great market (exceptions for resale, raw materials, and non-profits) goes untaxed. The vast majority of the time, that is also true when it comes to sales tax for online sales.
When do you need to charge sales tax for online sales?
Unfortunately each state and municipality structures their sales tax a little differently. As if taxes weren’t confusing enough! One concept worth trying to grasp is “Sales Tax Nexus.” This is a determination of your businesses presence in a state. Obviously if you have no customers in New Jersey and you have never sent a thing to or from there, you will not have to even consider paying sales tax to that state. A Sales Tax Nexus can be a determined by a number of factors:
- Location of business office or headquarters
- State in which an employee lives
- Place where a warehouse or inventory is located
- Third party fulfillment location
- Ideally, anywhere that you do a significant amount of business
How to charge sales tax on your website
When setting up your ecommerce checkout cart, the sales tax can be automatically factored in. For example, a business that conducts most of their transactions in Colorado and is based in that state, may choose to apply a standard 7% sales tax to all transactions. This is a reflection of the general sales tax within a specific area and negates the need to calculate each individual city and county that you may conduct business in. Then upon making a sale in a specific county, you only have to take a minimal amount out of your profit to make up whatever difference may exist to cover sales tax for that location.
Importance of sales tax for online sales
Having a record and keeping up to date on paying sales tax for your online business can be crucial in avoiding serious legal issues down the road. The digital marketing professionals at Tree Ring Digital do not claim to be tax experts, but we do understand the importance of collecting sales tax for online sales. Let us help you ensure your shopping cart is ready for checkout.