Just when you thought you couldn’t hate taxes any more, the U.S. Supreme Court ruling in South Dakota v Wayfair just opened up a whole new can of worms. As South Dakota can now more easily impose their state sales tax on ecommerce out-of-staters, many specialists are predicting that other states won’t be far behind in instituting similar laws.
As it stands now, online stores only collect and remit sales taxes for states in which they have a nexus in. (“Nexus” is legalese meaning you meet that state’s criteria for having to pay sales tax.) But with the June 21 Supreme Court ruling, more and more states are reevaluating their policies to cash in on South Dakota’s profitable idea. In fact, since the ruling, at least Connecticut, Georgia, Hawaii, Illinois, Iowa, and Kentucky have already begun changing their laws.
That leaves ecommerce stores — particularly the SMBs who have enough financial trouble as it is — biting their nails in wait of what’s to come.
Luckily, being prepared and educating yourself on how to manage sales tax can not only mitigate the risks, it may also even save you money. Here are some strategies for managing your sales taxes so they don’t overwhelm you — now or in the aftermath of South Dakota v Wayfair.
Determine Where You Currently Have a Nexus (and Stay Up-to-Date)
First things first, you need to figure out which states you must pay sales tax. Automatically, you have to pay sales taxes in your home state, but under certain conditions — which vary state by state — you’ll also be accountable elsewhere.
For quick reference, Tax Jar lists out every state’s nexus requirements on one page for convenient checking. These criteria typically revolve around:
- The yearly amount of money in sales you make in that state.
- The yearly amount of transactions you make in that state.
However, some states consider other factors, such as operating an office or warehouse in that state, hiring personnel who does business for you in that state, or having an affiliate or third-party shippers in that state. If any of those apply to you, double-check with those states’ regulations.
One more note. Because the South Dakota v Wayfair ruling is still recent, expect a lot of these criteria to change in the near future. Keep checking back on your states to stay up-to-date.
Know the Due Dates for States You Have Nexus In
Once you know which states you’re expected to pay sales tax for, you can start consolidating the when and how you have to pay. One key part to pay attention to is each state’s individual monthly due date. While a lot of them fall on the same day, it’s worth double-checking to avoid late charges.
Tax Jar also lists out each state’s sales tax due dates — updated every month — so you can quickly scan for the ones relevant to you.
Check If There’s Tax for Shipping
Another consideration you want to make sure of is whether shipping costs in that state are taxable. Calculating the wrong sales tax is a whole other headache, so it’s best to get it right from the start.
You can see which states tax shipping by checking out this map, again, thanks to Tax Jar.
Learn Whether Or Not Your States Offer a Discount
Now for some good news! Some states offer discounts on sales tax to reward early filings, meeting deadlines, where you registered, or even just as a thank you for paying them at all. But you may miss out on these discounts if you don’t know they exist, so to cut costs, be sure to check them out.
You can see the complete list of sales tax discounts by state, once again thanks to our friends at Tax Jar.
Use an Ecommerce Management Tool to Keep Track
All these numbers and calculations for different states can be intimidating, but you don’t have to deal with them alone. Using an ecommerce management tool like ours can help you stay organized and on the ball.
With ecomdash, you can quickly see helpful, referential data on sales taxes in your regular accounting reports. You can also create thorough purchase orders that include sales tax in the Landed Cost.
Conclusion: Stay Tuned
This is a tumultuous period for state sales tax in the ecommerce industry, so expect substantial changes in the near future. What that means is, even if you’re compliant today, the criteria may change tomorrow. Stay up-to-date for the foreseeable future; we’ll post any significant sales tax news, so keep checking back here at the Ecomdash blog.