A sales tax is a small percentage of a sale included in the sale price. Furthermore, it is a consumption tax that is payable on taxable items purchased at retail. If you’re handling an e-commerce business, your sales tax refers to the tax associated with an online sale.
While an important part of any business, new business owners may find sales tax to be a daunting endeavour. A complicated process, filing a sales tax may vary from state to state and there are likely to be exceptions. Luckily, we’ve written down a simple guide to filing your sales tax:
1. Register a sales tax permit
A sales tax permit will let you collect sales tax and file for taxes that you’ve received. Many states require a permit to collect sales taxes. As such, to register a valid permit, you need to gather all the necessary documents on your business and your EIN. When you have all of the papers, check the website of the Department of Revenue and see which state you need to register at.
2. Determine the tax rate
Once you have registered a permit, it’s time to identify the percentage of sales tax that applies to your items. The sales tax percentage will also vary from state-to-state. Therefore, it’s essential to do research first. Alternately, if you have an e-commerce accountant, he or she will help determine this for you.
3. Collect taxes
When you receive your permit, you can now collect taxes. In the United States, the total tax amount must be listed separately from the total cost; hence, you need to have your shopping cart programmed to assist this particular requirement.
It’s essential to know that in some states that have a sales tax, e-commerce owners are not required to collect and file them; instead, it falls on to the responsibility of the consumer. This complies with the Marketplace Fairness Act of 2013. That said, the consumer is the one who will file with the state for the items that they bought.
4. Document sales taxes
Keep records of the taxes that you collect. By doing so, you protect your business from error and thus, any legal complications. There’s no need to do this manually because there are online accounting systems to use that will record the necessary information. If you don’t know which method to use, you can always rely on your e-commerce accountant to take the reins on this one.
5. Report and pay sales tax
As a business owner, it is your responsibility to file quarterly reports of sales tax with payment. Usually, you can do this online. However, it’s still crucial to check the rules of your state when reporting and paying sales taxes.
Filing a sales tax for an e-commerce business may be a challenge, especially if you have other things to do when it comes to running your business. These steps will help you navigate the complex tax system on your own. However, having an e-commerce accountant will be a relief not just for when you need to file sales taxes, but for the benefit of your overall business as well. If you don’t have an accountant yet, then perhaps it's high time that you hire one!
We’re one of the leading e-commerce accountants in Australia. Get in touch with us now and let us know how we can help you!