State and local sales tax are collected when you have a brick-and-mortar store.Whether or not you have to collect sales tax online depends on the location of the customer.If you want to collect sales tax online, you must first determine the states in which you are liable for tax, then update your checkout process so that sales taxes are collected from customers that live in those states.
Step 1: Determine your sales tax rate.
You have to collect sales tax in any state in which your business has a physical presence, which includes a store, office, or warehouse.In legal terms, your "nexus" is your physical presence.Administrative offices are part of your business that don't participate in sales directly.If you don't know if you qualify as having a physical presence in a state, contact the state's tax or revenue agency.New Hampshire and Oregon do not have state sales tax.If you have a physical presence in one of these states, you may be responsible for collecting sales tax in other states.If your business is based in Oregon, but has a regional distribution warehouse in Pennsylvania to distribute products in the eastern part of the country, you may need to collect sales tax from Pennsylvania residents.Sales taxes only apply to customers who live in that location, or are having the goods shipped there.If you have a customer buying something in one state, but who wants it shipped to a different state in which you do, your sales tax liability may be different.Depending on whether you're collecting sales taxes in your home state or in an out-of-state location, your sales tax liability may be different.
Step 2: Call the tax authority.
You need to contact the sales tax department in your state to find out what rates and exemptions are available, and how you can submit returns.The state department of revenue usually handles sales tax.You can find out more about the sales tax in your state by visiting the department of revenue website.The department of commerce or similar state government agencies that cater to small businesses may be able to provide you with information about sales tax.You can find a list of links to state departments of revenue on the SBA website.
Step 3: You can submit a permit application.
Each state has its own form to fill out and submit to the appropriate authority.Sales tax collection is not legal in some states.The application requires you to provide information about your business, including its legal name and mailing address, as well as the contact person responsible for handling your sales tax.You can either fill out the form online or print it out and mail it.You won't have to wait for the mail if you submit your application online.You should make at least one copy of your application for your business records before you submit it.A small fee may be charged by some states to cover the costs of processing the application.After your application is processed, you will receive a sales tax permit or license in the mail, along with information about when and how to file returns.If you're collecting sales tax for multiple states, keep in mind that each state has different payment schedules and methods for reporting.
Step 4: Legal requirements should be kept up-to-date.
The law in this area can change very quickly.The federal government can control sales tax collection in all 50 states, or it can affect your tax liability.Most states require large online retailers to collect sales taxes regardless of whether they have a physical presence in the state.If you have under $1 million in sales, your business is exempt from the requirements.Federal laws have had exemptions for small businesses that sell online.
Step 5: You could use a shopping-cart service.
Many shopping-cart services automatically compute sales tax and collect it where necessary, based on the information you've already supplied regarding the physical locations of your businessWhile this can save you a lot of time and effort, keep in mind that these services are not a substitute for completing permit applications in the states where you have to collect and pay sales tax.If you use a shopping-cart service, make sure you have a sales tax permit in all of the states in which you collect tax from your online customers.You don't have to keep up with the sales tax rates in the states that you're supposed to be collecting if you use shopping-cart services.
Step 6: You can find the sales tax information in your checkout settings.
You should be able to find a tax entry in your account settings if you use the checkout program of the website builder.If you use multiple online marketplaces, you'll have to add sales tax information.If you're required to collect sales tax in a state, you should enter the information in your checkout settings even if you have never had a customer from that state before.If you haven't collected any sales tax during the reporting period, some states require you to submit a completed return.
Step 7: Enter shipping information.
The states for which you must collect sales tax are determined by the locations from which customer goods are shipped and the business addresses you keep in your account settings.If you add a new regional distribution center, you should update your shipping account information.Even if you only lease space in a location used by many different online retailers, a warehouse or distribution center may still be considered a physical presence in that state.
Step 8: Sales tax information can be added or changed.
If you don't use a shopping-cart service to calculate tax rates, you have to manually input it using your website's account settings.You should enter local sales tax for the places where your business headquarters, offices, or warehouses are located.If someone from that city or county purchases something from you, you have to collect local taxes as well.You have to indicate whether the state is your home for tax purposes.It is possible to be required to classify the type of sales tax the state has.You may be responsible for collecting international sales tax and VAT for customers in the European Union.If you ship products overseas, you may need an international commercial attorney to assess your tax liability.
Step 9: The process should be repeated as needed.
If you're setting up your website to collect sales tax on your own, you need to provide the same information for each state and locality.To make sure you're entering the correct rate, double-check the rates for each state.It is likely that you will need to collect sales tax for sales in your home states.If you have warehouses or distribution centers in other states, you must collect sales tax there as well.If you have remote employees who live and work in other states, their presence in another state may be enough to cause sales tax liability.If you sell through several different platforms or marketplaces, you may want to create a spreadsheet to make sure you have all the correct rates for each account.
Step 10: You can subscribe to a tax collection service.
If you sell goods or services through a number of different platforms, you may want to open an account with a tax collection service that will pull all sales tax information into one place.Sales tax collection services allow you to keep up-to-date on tax rate changes and save you the hassle of having to create spreadsheets.Some tax collection services will create and file reports for you.You don't need to submit an application for a permit on your own.
Step 11: You have collected the sales tax.
Keep track of your sales tax due dates on your calendar, and access your accounts on any platforms or channels through which you sell goods or services to find the sales taxes you've collected from customers in each stateSome states may require monthly returns, while others may only require quarterly or annual returns.Depending on your sales volume, you may be required to submit returns less often.You will need to create a spreadsheet to keep track of this information if you haven't subscribed to a sales tax collection service.To find out how much information you have to collect, check with each state.You have to account for the sales tax collected by each tax district in the state.
Step 12: The required returns need to be completed.
You must fill out a form and mail it with your payment in some states.Most states allow you to make your payments online.You can access the forms on the state department of revenue's website.If you don't hear anything before your due date, you should not rely on the forms the state may send you.You should pay attention to the information on the tax return.If you're not using a sales tax collections service to manage your sales taxes, you may want to design your own spreadsheet to mirror the information on the return so you can easily transfer the correct information.You may have to provide a breakdown of taxes you collected in certain parts of the state.
Step 13: You should submit your returns.
You can easily submit your returns and payments in many states.Make sure you mark the deadlines on your calendar as they may vary by state.Some states only require yearly returns while others require monthly or quarterly returns.The deadline is usually the 20th of the month, but don't assume the dates will be the same if you're submitting sales taxes in multiple states.If you have a permit or license to collect sales tax in a state, you need to file a return if you don't collect any during the reporting period.If you didn't collect any sales tax in a given state, check with the state's department of revenue to see if you have to file a "zero return."Before you submit your return to the state, make a copy of it for your own records.