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Frequently asked questions
Nexus is the qualifying criteria for a seller to be required to collect and pay taxes on sales in a state. Sales tax nexus establishes the connection between a taxing jurisdiction such as a state and an establishment such as your business. However, there isn’t necessarily a shared definition of nexus across the 50 states and the rules can change, and sometimes often. Read more here:
There isn’t necessarily a shared definition of nexus across the 50 states and the rules can change, and sometimes often. Consequently, a business must look at each state individually when determining sales tax nexus and must be attentive to the continuously changing regulations. Find more information utilizing our free state by state nexus risk calculator.
South Dakota v. Wayfair, Inc. is a 2018 U.S. Supreme Court decision that gives states the right to force out-of-state sellers to collect and remit sales tax, even if they do not have a physical presence in the taxing state.
Not at all. Physical nexus is the law of the land in every state. If you’re operating in the state, you’re going to have to register, collect and remit sales tax there.
As with economic nexus, qualifying criteria for physical nexus vary by state.
In 2018, the landmark South Dakota v. Wayfair, Inc. expanded the definition of nexus to include economic nexus. In short, if you sell enough in a state, there’s a chance you have to register, collect and remit sales and use tax there, regardless of whether or not you have physical operations in the state. Even if your business is based out of one state, economic nexus requires businesses to pay taxes into other states if they meet or exceed that state’s economic nexus threshold.
It depends. If you are purchasing your product at wholesale with the intention of reselling the product you will need to provide an exemption certificate to the supplier in order to be exempt from the sales tax. It is then your responsibility to collect sales tax from your customers when selling that product. Find our resale certificate chart here.
You are issued a filing frequency (monthly, quarterly, or annually) when you are issued your sales tax permit. Therefore, the state expects to hear from you on that due date, even if it is as a “zero return” file.
This one depends. If you are an eCommerce seller based in a state with an origin-based sales tax, the answer is yes. You do charge sales tax based on the sales tax rate at your location. However, there are only a few states that are origin-based. If you live in a state with a destination-based sales tax then you will need to charge sales tax based upon the ship-to location of the buyer.
This guide will take you through state-by-state, giving you the essential facts you need to quickly determine if you or your client may have either Physical or Economic Nexus (or both) in any given state.
Many businesses make the false assumption that if their services do not coincide with goods sold then these services are not taxable. That simply is not true and can be a costly assumption. Here are some things to consider when determining the taxability of your services.
There is a common misconception by many retailers that working with independent contractors – anyone that is not directly managed by the company – does not create nexus for the retailer in the state where the contractor is located. However, the services that the independent contractors provide on behalf of the retailer are most often considered doing business in the state where the contractor is located which creates physical nexus.
In short, yes. States audit companies of all sizes. Even super small businesses who only sell in one state could have big problems if they aren’t aware of the tax consequences of their business and they are audited.
A marketplace facilitator law is a law that requires any given online marketplace facilitator platform to collect and remit sales tax for the online sellers who use their platform to make sales. These platforms enable sales by listing products and taking the payments. They also collect receipts and may assist in shipment. Some examples are eBay, Etsy and Amazon.
There are marketplace facilitator laws that currently require marketplace facilitators such as Amazon, Etsy, and others to collect and remit the sales tax in the sale of your items. So you shouldn't have to worry about sales tax as a seller on one of these marketplaces. But you will have to refer to your marketplace facilitator directly to know exactly to what extent they are handling your sales taxes.
Ultimately, it depends on the state and whether they have marketplace facilitator laws and economic nexus laws in place.
There are many states that will not require marketplace sellers who sell exclusively online utilizing a marketplace platform to register with the state or file returns regardless of whether they’ve reached the economic nexus threshold. Then on the other hand, there are other states that want online sellers to register and the state may also provide specific instructions when it comes to registering and remitting sales tax.
Read more here:
Sales Tax And Marketplace Facilitators
For most businesses, getting compliant is an essential yet daunting task. Reviewing your situation and total liability is the first step towards compliance. Start out by asking yourself 3 questions.
- Do I Have Nexus?
- Is What I Sell Taxable?
- Am I responsible for paying these taxes?
Don’t hesitate to contact a professional. At the end of the day, it all comes down to becoming educated on your own personal requirements, as everyone’s circumstances and state legislation differ. There is a lot of information to sift through and consider. Don’t let sales tax hold you and your business back from reaching full potential. Hop on to our completely free “What’s Next Call” where we can provide guidance, a second opinion if that's what you're needing, or answers to any other questions regarding sales tax and your online business. Let’s collaborate.
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