Creating an online store today can be a great way to make money without the need of a local store. However, as the internet continues to become more regulated, the smart shop owner is going to do a little research to keep your store… out of hot water.
Death and Taxes (well just taxes today)
When you have a shopping cart online, you must collect and report and pay the correct sales tax rates. But the question is, how will your website know the right amount to charge when there are hundreds of different tax rates? Each state may have over 100 counties with different sales tax rates per county and there are (at the time of writing this article) 25 states that require you to charge sales tax when selling to people in their state!
You may be wondering… “Do I even have to collect sales tax at all?”. The answer is “yes” for most states. It gets a little tricky when determining shipping and taxes from within your state, or OUTSIDE your state. As for sales OUTSIDE your state, you will need help to decide if, when and how much; based on the number of sales and total of those sales per state.
For example, you won’t need to charge sales tax to a state if you don’t sell enough to people in that state.
Modern Web Studios to the Rescue
We have been in this business for over 20 years setting up dozens and dozens of eCommerce stores. At one time, it was simple to set a single tax rate for your state as you only needed to collect for IN STATE sales tax; but no longer. As more and more take to the internet to make purchases state governments want to make sure that sales tax revenue for residents in their state is compensated for (y’know… because they didn’t make enough on fishing licenses); it is very important to make sure you are in compliance when the people in the black cars, black suits and red pens show up. Modern Web Studios uses and encourages companies to use Tax Cloud. See more below.
Here’s a useful tool made by TaxCloud.net to help you determine that… https://taxcloud.net/state-guides
Here’s an article by QuickBooks to support these facts: https://quickbooks.intuit.com/r/taxes/need-collect-sales-tax-much
Here’s the take-away from the above article…
So, many online sellers can ship goods out of state without charging or collecting sales tax provided they don’t have a physical presence in that state.
However, a more recent court decision made this more complicated for sellers who are making a lot of sales to a certain state. Consider the South Dakota v. Wayfair decision in 2018,. The Supreme Court ruled that states can require businesses with no physical presence but substantial business in a state to charge sales tax. The ruling defined a “considerable amount of business” as more than 200 transactions or $100,000 worth of goods sold to that state.
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