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Multi-Channel Sales Tax Compliance

Multi-Channel Sales Tax Compliance. Tonight’s Topics. “General Rules” of Sales Tax Multi-channel & Multi-state Compliance When to Collect How Much to Collect Here to Help. Quick Intro. Web technology + small business + taxes Previous tax products: FileLater (IRS efile )

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Multi-Channel Sales Tax Compliance

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  1. Multi-Channel Sales Tax Compliance

  2. Tonight’s Topics • “General Rules” of Sales Tax • Multi-channel & Multi-state Compliance • When to Collect • How Much to Collect • Here to Help

  3. Quick Intro • Web technology + small business + taxes • Previous tax products: • FileLater (IRS efile) • EasyEstimatedTaxes (Treasury) • Founder of TaxJar

  4. “General Rules” of Sales Tax • There are too many rules! • In-state sales = collect and remit sales tax • Out-of-state sales = not obligated….yet • The definition of out-of-state (a.k.a nexus) depends on the state

  5. “General Rules” of Sales Tax • How much to collect depends on various factors • Filing deadlines usually tied to sales volume • Some states have discounts for early payment • All have penalties for late payment • Save everything in case of audit

  6. Moving to Multi-Channel • Selling items on more than one platform • Some platforms help you collect sales tax • None help you file or pay • Sales tax is being collected in different accounts

  7. Impact on Compliance • Combine and file a single return • Not separate returns per channel • Most sellers manually combinetransactions in excel • Adding Amazon = multi-state business

  8. When to Collect

  9. Nexus: When to Collect • Presence in a state significant enough that you need to collect sales tax in that state • Collect sales tax from customersand remit to the state • No presence in a state means youdon’t have to collect

  10. Nexus Types Home Office Inventory Inventory is in a warehouse Live in San Jose with inventory Pennsylvania Collect: CA & PA • Where you live and/or operate your business • Live in San Jose and sell out of your house • Collect: CA

  11. Collecting The Right Amount

  12. How Much Do I Collect? • Tax rate usually = state + local + special • Origin-based state • Tax rate = seller’s location • Destination-based state • Tax rate = where item is shipped • California

  13. Sale in Texas IRVING ARCHER CITY Rate collected: 8.25% • State: 6.25% • Irving: 1.00% • Dallas MTA: 1.00%

  14. Destination-Based: NY NY’s Guide to Sales Tax in New York State (page 9)

  15. Sale in New York STAMFORD BUFFALO Rate collected: 8.75% • State: 4.00% • Erie County: 4.75%

  16. Filing in Destination • Huge pain! • Calculate taxable sales and sales tax collected by jurisdiction • Gets worse if you’re multi-channel

  17. Ohio eFile

  18. California: We’re Special! • Technically, neither Origin or Destination • Sales tax rate= state + district tax(es) • District tax only collected on sales in a district in which you are “engaged in business” • (Pub 44, Page 5) • Sellers are able to charge 2 different rates • Customers in your district • Customers outside your district • Pub 177

  19. Same District Sale SAN DIEGO CLAIREMONT Rate collected: 8.00% • State: 7.50% • San Diego County: 0.50%

  20. Out-of-District Sale SANTA CLARA ALAMEDA Rate collected: 7.50 % Buyer responsible for local use tax

  21. Collecting on eBay • Able to collect only one rate • Collect at district rate for everyone • Shoppers complain if rate is too high • Collect at state rate for everyone • Pay out-of-pocket for in-district sales • Competitive advantage?

  22. Last Thing… Trying to comply > knowingly not complying

  23. TaxJar: Here to Help • Automatically pulls and organizes sales and tax data from your accounts • Creates local jurisdictional reports • Payment reminders • Sales tax expertise

  24. Dashboard

  25. Let’s Talk! mark@taxjar.com Twitter: @taxjar

  26. Save for Later

  27. Multi-Channel California Texas New York

  28. Confused Yet? • How do we share AZ stories of how bad it is but then say it’s not that bad? • Many states will actually answer the phone • Get it in writing! • Use eFile whenever possible

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