Multi-Channel Sales Tax Compliance
Tonight’s Topics
• “General Rules” of Sales Tax
• Multi-channel & Multi-state Compliance
• When to Collect
• How Much to Collect
• Here to Help
Quick Intro
• Web technology + small business + taxes
• Previous tax products:
• FileLater (IRS efile)
• EasyEstimatedTaxes (Treasury)
• Founder of TaxJar
“General Rules” of Sales Tax
• There are too many rules!
• In-state sales = collect and remit sales tax
• Out-of-state sales = not obligated….yet
• The definition of out-of-state (a.k.a nexus)
depends on the state
“General Rules” of Sales Tax
• How much to collect depends on various factors
• Filing deadlines usually tied to sales volume
• Some states have discounts for early payment
• All have penalties for late payment
• Save everything in case of audit
Moving to Multi-Channel
• Selling items on more than one platform
• Some platforms help you collect sales tax
• None help you file or pay
• Sales tax is being collected in different accounts
Impact on Compliance
• Combine and file a single return
• Not separate returns per channel
• Most sellers manually combine
transactions in excel
• Adding Amazon = multi-state business
When to Collect
Nexus: When to Collect
• Presence in a state significant enough that
you need to collect sales tax in that state
• Collect sales tax from customers
and remit to the state
• No presence in a state means you
don’t have to collect
Nexus Types
Home Office
Inventory
• Where you live and/or
operate your business
• Inventory is in a
warehouse
• Live in San Jose and
sell out of your house
• Live in San Jose with
inventory Pennsylvania
• Collect: CA
• Collect: CA & PA
Collecting The Right Amount
How Much Do I Collect?
• Tax rate usually = state + local + special
• Origin-based state
• Tax rate = seller’s location
• Destination-based state
• Tax rate = where item is shipped
• California
Sale in Texas
IRVING
ARCHER CITY
Rate collected: 8.25%
• State: 6.25%
• Irving: 1.00%
• Dallas MTA: 1.00%
Destination-Based: NY
NY’s Guide to Sales Tax in New York State (page 9)
Sale in New York
STAMFORD
BUFFALO
Rate collected: 8.75%
• State: 4.00%
• Erie County: 4.75%
Filing in Destination
• Huge pain!
• Calculate taxable sales and sales tax
collected by jurisdiction
• Gets worse if you’re multi-channel
Ohio eFile
California: We’re Special!
• Technically, neither Origin or Destination
• Sales tax rate= state + district tax(es)
• District tax only collected on sales in a district in
which you are “engaged in business”
•
(Pub 44, Page 5)
• Sellers are able to charge 2 different rates
• Customers in your district
• Customers outside your district
•
Pub 177
Same District Sale
SAN DIEGO
CLAIREMONT
Rate collected: 8.00%
• State: 7.50%
• San Diego County: 0.50%
Out-of-District Sale
SANTA CLARA
Rate collected: 7.50 %
Buyer responsible for local use tax
ALAMEDA
Collecting on eBay
• Able to collect only one rate
• Collect at district rate for everyone
• Shoppers complain if rate is too high
• Collect at state rate for everyone
• Pay out-of-pocket for in-district sales
• Competitive advantage?
Last Thing…
Trying to comply >
knowingly not complying
TaxJar: Here to Help
• Automatically pulls and organizes sales and
tax data from your accounts
• Creates local jurisdictional reports
• Payment reminders
• Sales tax expertise
Dashboard
Let’s Talk!
[email protected]
Twitter: @taxjar
Save for Later
Multi-Channel
California
Texas
New York
Confused Yet?
• How do we share AZ stories of how bad it is but then
say it’s not that bad?
• Many states will actually answer the phone
• Get it in writing!
• Use eFile whenever possible