Sales Tax 101

Sales101-232x300.jpgYour business is growing. That is a good thing, in fact that is the reason that you are in business in the first place. However, growth is not always easy, success brings new challenges and hiccups. One of these potential challenges is sales tax compliance. With a growing network of sales locations comes a growing sales tax liability, but where do you start? Our sales tax experts breakdown the sales tax process to five easy steps to help you understand, register, collect and file sales tax.


Step 1. Determine Where You Have NEXUSStep1.png

Nexus is simply a way of saying you have legal obligations to collect and remit sales and use tax in a given state.

Activities that give you nexus vary from state to state. Check out our “The Truth About Nexus” guide to get more information. In the meantime, take a look at the checklist below that highlights some of the activities that can result in nexus in a state other than where you are based.

NEXUS CHECKLIST

  • I have an employee in a state other than where I am based
  • I have a contractor in a state other than where I am based
  • I have an affiliate in a state other than where I am based
  • I store my products in a state other than where I am based
  • My products are distributed from a distribution center in a state other than where I am based
  • I attended a trade show in a state other than where I am based
  • I work with a drop shipper in a state other than where I am based


Step2.pngStep 2. Get A Sales Tax License

In all of the states you have nexus in, you now need to obtain a sales tax license. Just like the nexus rules, the ways to obtain the license differ from state to state. A simple Internet search of “(state) sales tax license application” will direct you to the proper place, just add which state you are looking for. For more information and state specific links, take a look at our blog series “How to file in…” The good news is that states want to collect sales tax, so they generally make obtaining a license an easy exercise.



Step 3. Collect TaxStep3.png

Once you have your sales tax license, you are now ready to start collecting sales tax. Determining rates and when to charge tax can be very challenging. Many shipping-cart software providers handle sales tax transactions and are automatically programmed to calculate the rate based on location. If you are not able to do this though your provider, the rates are available online, but can change and do differ even within the state, so make sure you keep current and keep specific.



Step4.pngStep 4. Calculate

The point of collecting the sales tax is eventually paying the sales tax to the state. As you get closer to your filing date you need to calculate your sales to determine how much sales tax you need to remit. This can be done a number of ways.

If you are using one platform to collect, most offer a sales tax report that will break down everything processed through your store. If you have multiple platforms, this process can be a bit trickier as one report will not cover everything. So be sure to collect all reports from all of your platforms. Making things even more complicated, many states require more indepth information including customer’s city and/or county. Extra information like this can result in hours spent sifting through paperwork in order to file correctly.

Taxify handles all of the above for you. Hours of paperwork become seconds of clicks and multichannel issues are funneled into simple reports calculating all of your sales on all of your channels.



Step 5. FileStep5.png

However you generate your reports, you must then file and remit them in all the states that you have nexus. Always be sure to file and file on time. Even if you did not have any applicable sales that month, you still need to file a zero dollar return. Filing late or not filing, even when you have no sales, can drastically increase your business’s chances for audit.

This is another complicated process that Taxify is able to simplify. AutoFile is the easiest way to file and remit payment to every state. No more paper, no more checks, no more licking stamps. Simply click and get back to focusing on your business. Effortless sales tax compliance.

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