What is a Sales Tax and why do online marketplace sellers need to know:
A sales tax is imposed on retail sales of goods and services by many states and local governments. The amount of tax paid is typically figured as a percentage of the sale price. Currently there are 45 states that charge a sales tax and five states (Alaska, Delaware, Montana, New Hampshire and Oregon) do not have a sales tax.
A seller in a traditional brick-and-mortar store without any online sales, collecting, reporting and filing sales tax is pretty straight forward. But if you are an online marketplace seller, you probably need to collect sales tax from buyers located in multiple states and counties. Each one of those states and counties has different rules, different percentages of taxes to collect and it can get very complicated trying to understand if you business is required to pay sales tax and how much you need to collect.
Understanding Your Sales Tax Nexus:
According to the Sales Tax Institute, "sales tax nexus defines the level of connection between a taxing jurisdiction such as a state and an entity such as your business." "Your business will likely have nexus in your home state (where your business is registered), but it is possible to have next in other states as well. Factors that influence a nexus in another state includes:
Marketplace Nexus and Marketplace Facilitator Legislation typically means that if an online marketplace operates its business in a state and provides e-commerce infrastructure as well as customer service, payment processing services and marketing, the marketplace facilitator is required to register and collect tax as the retailer rather than the individual sellers. According to Amazon, "a Marketplace Facilitator is defined as a marketplace that contracts with third party sellers to promote their sale of physical property, digital goods, and services through the marketplace. As a result, Amazon is deemed to be a marketplace facilitator for third-party sales facilitated through Amazon's global marketplaces." As a marketplace facilitator, Amazon is "responsible to calculate, collect, remit, and refund state sales tax on sales tax on sales sold by third party sellers for transactions destined to states where Marketplace Facilitator and/or Marketplace collection legislation is enacted." There are some states, local taxes are not included in the legislation so you need to know which status and local taxes are collected and not collected by your marketplace.
andWhat is Sales Tax Automation?
Sales Automation automates the sales tax processes for all required states and counties and includes business registration, applying the correct State, County and Local tax rates, streamlines the documentation and files the returns. Considering the variations in the thousands of jurisdictions and the penalties and fees if the sales taxes are not collected and reported correctly, it is clear to see the benefits of automating the sales tax process.
DBC Limited provides Sales Tax Filing Services either as a bundled service with our Automated Store Management products or as a stand-alone service to help you navigate the Sales Tax collecting, reporting and filing services for your online store. Using custom designed software, our team of Sales Tax professionals manage the reporting and filing services for each state where you have a nexus, helping you to stay compliant and up-to-date. According to the Sales Tax Institute, Sales Tax preparation is a continual cycle and requires an understanding of each State's laws.
Our Sales Tax Process