Selling online and in person is fantastic for your bottom line, but it can make sales tax a little more complicated. As April’s sales tax due dates roll around, our friends at TaxJar are here with some tips for how to simplify the whole process. And to make sales tax even more of a breeze, connect your Square account to TaxJar in Square App Marketplace. (Remember, this post is for educational purposes only. For tax advice related to your business, be sure to consult with a professional.)
When you only sell in person, your sales tax obligation is relatively simple. You keep track of how much you collected in sales tax, slice and dice the funds the way your state wants to see them, and file a sales tax return when it comes due. (Check out our Square sales tax guide for more information.)
But if you add online sales into the mix, you have to pull another sales tax report and add that to the sales tax you collected from selling in person. The vast majority of states want you to break down your sales tax collected by state, county, city, and other special taxing districts. While this may have been pretty easy when you just sold at your brick-and-mortar shop or at an event, once you begin selling online you usually have multiple sales tax rates and locations to worry about.
And especially when you’re dealing with more than one e-commerce channel, it can be tough to find all the numbers, do the math, and figure out what each state wants to see on your sales tax filing.
Luckily, there are a few things you can do to make your sales tax life as a multichannel seller a little easier:
Know your sales tax nexus.
Sales tax nexus is a fancy way of saying that your business has “significant presence” in a certain state. You need to collect sales tax from all buyers in any states where you have sales tax nexus. Knowing exactly where you have nexus will make your April sales taxes way less of a headache. (Read more about how to figure out if you have sales tax nexus.)
Make sure you’re collecting sales tax on all channels.
If you have an e-commerce presence, make sure you’re collecting sales tax from your customers on all the platforms you sell on.
Also make sure you’re collecting tax from online buyers in all the states where you have nexus. For example, if you hired a few employees in a remote state to help you with customer service for your online store, you could have sales tax nexus in that state. Which would mean all your e-commerce platforms need to be set up to collect tax from customers in that state.
Use sales tax automation.
It’s a good idea to implement sales tax automation software (like TaxJar) to make all of this as easy as possible. Sales tax automation software will integrate with the online shopping carts you sell on, tell you exactly how much sales tax you’ve collected from buyers in all your nexus states, and break that tax down just the way your state wants to see it. TaxJar will even AutoFile your sales tax returns for you to take the process completely out of your hands.
As your business grows, you’ll find that administrative hassles like sales tax grow more complicated. Fortunately, we now have the tools to make sales tax simple so you can get back to doing what you do best — running your business.
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.
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