Sales Tax for Q4
The end of the year is almost three months away, but extra traffic and sales from the holidays means that Q4 feels shorter than other quarters. It’s a good idea to take a few minutes now to make sure your sales tax processes are updated and working as planned – because the holiday rush is just getting started!
With the goal of simplicity in mind, here are 5 steps you can take to help simplify the upcoming holiday sales season.
1. Make sure you are collecting sales tax in all of your nexus states
Have you started collecting sales tax in a new state? “Sales tax nexus” means that your business has a significant presence in a state. You’ll always have sales tax nexus in your home state, but other factors can cause you to have sales tax nexus in other states as well, like a warehouse that stores your merchandise or a remote employee in a new state.
If there’s a state where you find you have unexpected nexus, you should make sure to register for a sales tax permit in that state and set up your Amazon state sales tax settings to ensure you are collecting from buyers in that state.
2. Make sure you have set up sales tax settings for shipping and gift wrapping correctly
Many states vary on whether or not shipping charges or gift wrapping services are taxable. Amazon will allow you to choose if you wish to charge sales tax on shipping and gift wrapping, and here’s a handy guide to setting up Amazon sales tax on both. We also have you covered with a guide for which states consider gift wrapping taxable.
If you have done your homework and completed this step before now, keep in mind that tax laws are always changing. On August 28, 2017, the state of Missouri changed their tax code to state that shipping charges are no longer considered taxable. If Missouri is a nexus state for you, make sure your settings reflect the current laws. This is why we recommend that you take a few minutes right now to go ahead and check the current status of all the states where you have nexus.
3. Make sure you are collecting sales tax for all shopping carts and marketplaces in all of your nexus states
One of the most prevalent mistakes we see sellers make is forgetting to set up sales tax collection for all of your shopping cart platforms in all of your nexus states.
A lot of sellers decide to start selling through new marketplaces during the holiday season, places such as the Walmart Marketplace or new carts like Shopify. It is great to expand your reach during the busiest sales season of the year, but you can fall into a trap if you forget to collect sales tax for all of your nexus states with your new platform. Even if the only reason you have nexus in Georgia is because you sell on Amazon and Amazon stores some of your merchandise in a Georgia warehouse, this means you still have nexus in Georgia and you are obligated to collect sales taxes for your Etsy and eBay sales in Georgia as well. It is a really good idea to go and double check this right now.
4. Make sure you are using the right tax codes for your products
Collecting sales tax puts online sellers in a bit of a tightrope situation—if you collect more sales tax than you are allowed, you’ll have unhappy customers. However, if you err on the other side and do not collect enough sales taxes, you could be on the hook to make up the different out of your own pocket. Make sure you hold your breath and keep your balance!
For example, clothing is non-taxable in Pennsylvania. If you charge a Pennsylvanian sales tax on a pair of jeans, they won’t be happy. Fortunately, you can avoid this by making sure you assign the right product tax codes to all of your products.
All you have to do is tell Amazon that your product is clothing (or textbooks, or groceries, etc.) and they will ensure that sales tax is always charged on that product in states where it is taxable, and not charged on it in states where it is not taxable.
5. Automation is the key to superhero sales tax simplicity
Q4 is here and it will be gone in the blink of an eye. As a seller, this means you will have to balance the surge in your business with wanting to spend quality time with your loved ones. This is a perfect time to consider putting your sales tax compliance on autopilot so you won’t need to worry about missing a filing deadline. Instead you can focus on filling orders and making memories. If you have better things to do than to file sales tax returns, try sales tax automation software.
Sales Tax for Q4 – I hope this post helped you simplify your business by providing preventative measures to ensure that you can bask in a smooth and profitable Q4. If you have any questions, feel free to start the conversation below in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!