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Mobile Business? How to Charge Sales Tax on the Go

This article is written by Mark Faggiano from TaxJar

One of the best things about Square is that you can accept payments anytime, anywhere. You can sell your goods at a craft fair in one state and a farmers market in another.

Figuring out sales tax rates has historically been a bit complicated. But now, you’ll never have to worry about it when you’re on the go. The newest Square sales tax feature, powered by TaxJar, allows you to look up the sales tax rate in the state and city you’re standing in at this very moment — and add it seamlessly to your Square transactions.

But while you can take care of sales tax right from your Square app, it’s helpful to know the background of why this all matters. From our friends over at TaxJar, here’s the need-to-know intel about sales tax for Square sellers. (Remember, this post is for educational purposes only. For tax advice related to your specific business, consult a reputable accountant).

What traveling Square sellers need to know about sales tax percentages

Forty-five states and the District of Columbia require merchants to charge sales tax on transactions. Sales tax is generally a percentage of a transaction. Let’s say you sell a pendant for $100 at a craft fair in Elizabeth City, North Carolina. The sales tax rate in that ZIP code (27906) is 6.75%. So you would charge $106.75 for the total purchase. But if you head inland to another show in the town of Rocky Mount, North Carolina, which is ZIP code 27803, the sales tax is 7%.

It’s sort of a headache to stay on top of these changes if you’re on the go. What’s more, messing up can affect your bottom line. If you charge too much, customers may notice and go to a competitor. If you charge too little, you end up owing the state sales tax out of your pocket.

That’s why enabling the Square sales tax lookup feature is worthwhile — it takes out the guesswork and ensures you get it right.

And then there’s sales tax nexus

The above scenario assumes that you have sales tax nexus in the state where you’re selling. Sales tax nexus is just a fancy way of saying “significant presence in a state.” Sales tax is governed at the state level, and all states define sales tax differently, but the general consensus is that you have a significant presence in a state where you:

  • Have an office or location
  • Have an employee
  • Have a warehouse
  • Have an affiliate
  • Store inventory
  • Drop-ship from a third-party provider
  • Temporarily do business for a limited amount of time, such as at a trade show or craft fair

Let’s examine that last one. If you take your handmade jewelry on the craft fair circuit and set up a booth for the weekend in another state, then you may end up with sales tax nexus there, too.

For example, Minnesota considers that you have sales tax nexus if you do business in the state for more than four days out of the calendar year. Georgia allows you to do business for five days before sales tax nexus requirements kick in.

When that happens, the state will want you to register for a sales tax permit. This allows you to legally collect the amount of sales tax at the point of sale. From there, the state will let you know when you should remit the funds you collected. (Sales tax goes back to your state’s department of revenue. Sadly, you can’t keep it!)

Some states allow you to apply for a temporary sales tax permit if you only plan on being in town for a short time. Also, the organizers of many craft fairs, festivals, and trade shows are accustomed to dealing with sales tax and may even be able to offer guidance about the local area’s sales tax requirements. Click here to find out what each state has to say about visiting sellers and sales tax nexus. (Hint: For the most part, states consider that you have nexus there if you make a sales within their borders.)

How to look up sales tax rates from your Square Dashboard

Ready to start looking up sales tax rates the easy way? First, you need to have a TaxJar account, which you can install from the Apps page in Square Dashboard. Once you’re on your TaxJar dashboard, you should see a link at the upper right that says “Add a new tax for me at Square.” (If you’re on a mobile web browser, you’ll see a button that says “Add rate to Square” like the one below). And voilà, you’re all set to start taking payments in that state.

So if you’re a Square seller who sells on the go, we salute you. You’re part of the new, mobile economy. We hope this post, as well as the new on-the-go sales tax feature, will help demystify one of the harder aspects of being a mobile business, so you can get back out there and keep on selling.

For more finance and tax tips and advice, sign up for our monthly newsletter, Town Square News, or head to the Finances section of Town Square.

About TaxJar
Sales tax is complex. That’s why we created TaxJar — to handle the burden of sales tax while you get back to running your business. TaxJar pulls in sales tax collected from all the channels where you sell, compiles your data into return-ready reports, and can even AutoFile your sales tax returns for you in 26 states (and counting). Sign up for a 30-day TaxJar free trial today and put a lid on sales tax. And check out Square App Marketplace for more information on how to link your Square account to TaxJar’s tools.