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The 2024 Guide to Sales Tax for Online Sellers: What Every Business Needs to Know

online sellers
Sales tax is not a straightforward subject; in fact, it has a lot of moving parts. When it comes to sales tax for online sellers, things can get even more complicated.

Different states require different taxes on different items, and policies are always changing and adapting. Furthermore, within a state, there may be regions where sales tax rules vary. Not taking the time to understand this can have serious repercussions and potentially unnecessary cash out of your pocket.

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Know Your State’s Laws

One of the tricky things about sales tax is that individual states are permitted to set their own rules—there is no national sales tax. This means states decide which items to tax and how much tax to charge.

Moreover, many states allow local areas to set their sales tax rates independently. While it’s impossible to list each jurisdiction’s sales tax regulations, the main takeaway is that it’s crucial to research your state and region’s sales tax rules, as there may be significant variations you aren’t familiar with.

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Know Your Company’s Obligations

Online sellers and local retailers in the USA are required to collect sales tax only when they have ‘Nexus’ in that state. Nexus means a significant presence and refers to factors such as a physical location, personnel, affiliates, or other business activities.

You also need to know which items are taxable and which aren’t. While most states tax items like clothing, textbooks, and groceries, others do not. This means online sellers and local retailers in different states or regions can face different combinations of sales tax requirements.

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Understand Filing Frequency

After determining whether you have Nexus in a state, you’ll need to register for a sales tax permit. Once registered, your state will inform you of your filing frequency for tax returns. Typically, this will be monthly, quarterly, semi-annually, or annually. The frequency depends on the size of your Nexus and state rules. Generally, the more tax revenue you generate, the more frequently it will be collected. States prefer active revenue for local infrastructure rather than money sitting in an account.

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Avoid Fines and Penalties

Due to the variation in state sales tax laws, it’s easy to make honest mistakes. The two most common errors businesses make are not collecting sales tax when they should and not paying these taxes on time. Given the complexity, it’s not surprising these mistakes occur.

Sales tax is due on different dates in different states—sometimes on the 15th, sometimes the 20th, or the 23rd of the month. It’s easy to mix up these dates or confuse the amount of sales tax due. Mistakes like these can result in penalties and extra interest. However, if something falls through the cracks, it’s worth discussing with your state’s tax authority, as some may waive penalties for innocent mistakes.

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Stay Updated with Standards and Guidelines

Sales tax policy is always changing, so staying up-to-date is crucial. Sometimes the sales tax rate changes; other times, it’s the filing frequency. Occasionally, a state will start taxing an item it didn’t before or reduce the number of items taxed.

When it comes to online sales tax, the policy is even more varied. Current guidelines say that sales tax should be paid at the point of sale, meaning the buyer or end user. However, this is subject to change at any point.

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Hire a CPA

Outsourcing these tasks to a Certified Public Accountant (CPA), especially when utilizing technology to streamline the calculation of your sales tax and determine if Nexus is applicable, will save you time and money. This allows you to focus on growing your business.

A CPA has the professional experience needed to organize your sales tax and ensure you pay the right amount at the right times. With so many moving parts when it comes to selling online, it’s worth investing in a CPA to ensure compliance and avoid penalties. Professional help will ensure you collect the correct sales tax from your customers and remit it to the state, preventing this money from coming out of your pocket.

Sales Tax Got You Scratching Your Head?

If sales tax is making your head spin, contact a licensed CPA near me in Texas. We handle the complexities of sales tax, ensuring you collect and remit the correct amounts. This way, you can focus on growing your business instead of worrying about tax compliance.

Our team of licensed CPAs in Austin, TX, is here to assist with all your accounting needs. As a leading accounting firm in Austin, we specialize in providing top-notch tax services tailored to your business. Whether you’re looking for a CPA in Texas or need specific assistance from a tax CPA, our knowledgeable tax accountants are ready to help. Don’t wait—contact our Austin CPA experts today!

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