hey it's patti scharf CPA and co-founder of catching clouds the leader on
e-commerce accounting today we're going to talk about sales tax again if you
haven't already checked it out we've got this great video that Scott and I did a
few days ago shortly after the US Supreme Court came back with their
ruling on the South Dakota versus Wayfarer case where they set up
basically the standard for what needs to happen for charging sales tax for online
sellers and frankly all sellers but we focus on online sellers because that's
what we do so so today we're just gonna go over some of the questions and
answers that we've been seen there's been a flurry of activity lots of
articles lots of chatter on different forms and Facebook and different things
and so we thought we'd tackle the most common questions that we've seen and see
if we can get you guys some answers so let's get started so the first question
is so does this mean that sellers now have to start collecting sales tax well
this is kind of a funky question because it implies that they didn't have to
collect sales tax previously but they actually did they if you have physical
Nexus so what that is is a business presence in a particular city county
state you have you have a legal obligation to collect sales tax in those
jurisdictions so how do you know if you have physical Nexus that's where you
have property that's where you have inventory that's where you have
affiliates sales people employees things like that things that actually tie you
to the state so a lot of people wanted to kind of pretend that they didn't have
to collect sales tax or they took the attitude that well you know let them
come and get me I'm too small to be worried about or something like that so
it is true that people in those situations had to collect sales tax what
this ruling did was it added a new concept called
economic Nexus so there are some states who were trying to say hey you're you're
tied to our state by virtue of fact that we see sales going on in our
state if you weren't tied to our state then we wouldn't be seeing these sales
so collect the sales tax and pay up so so that's what you're seeing with some
of these other states like South Dakota where they have hey if you're selling at
least a hundred thousand dollars or have two hundred transactions in our state
then you have a filing obligation in our state again check out that video that I
told you about because we go into a lot more detail about that the next question
oh so does that replace the physical Nexus thing so a lot of people have this
misconception that because of this court case now we're paying attention to
economic Nexus and we don't have to worry about the physical Nexus and
that's not true both are in effect so you need to pay attention to both of
those situations one last very important bonus tip for you on this is that you
need to remember to register in each of these states that you're planning on
filing in before you actually start collecting sales tax because if you
don't have a sales tax license to collect sales tax collecting sales tax
without one is illegal it's a criminal act so I recommend you try to avoid that
the next question is our small sellers exempt you would think so logic would
kind of lead you to believe that but but here's the problem if it kind of depends
how you define small seller and what might be a small seller in one state
might not be a small seller in another state you really have to look at the the
nexus rules in each of those individual states to see whether you're considered
a small seller you everybody is equal under the law this applies across the
board to everybody but if you go below those thresholds then yes you would be
exempt but you need to keep an eye on it because as you grow you might exceed it
so you need to pay attention that if you stick around to the end of this video
we'll give you a link to something that can help you kind of see what those
thresholds are and see if it might apply to you the next question is
if I sell wholesale so here's the deal if you're selling your products to
somebody else and they are selling it to the ultimate consumer the end user of
that product the person you're selling it to is the one who's responsible for
collecting and remitting sales tax however when you are applying these
nexus rules it's my understanding that you need to pay attention to your total
gross sales so even if you are only selling to wholesalers you need to take
a look let's say I'm selling a million dollars and I meet actually let's make
it huge a hundred million dollars and I'm selling to all these different
customers in these different states I need to have because I'm exceeding their
thresholds I'm going to need to register to file returns in their state when I'm
filing the sales tax returns I can list on the return hey this much is exempt
because somebody else is selling the product to the end-user and so you won't
have to actually collect tax and remit it but that doesn't mean that you're out
of the responsibility for actually registering and filing a zero return or
something like that one more comment about that if you are
selling wholesale you need to make sure that you have on file a copy of a tax of
a resale tax exemption certificate for every single customer that you're
selling wholesale to otherwise you're not supposed to be exempt from
collecting and remitting sales tax for that person or company what if my
products aren't taxable this is the exact same situation as the wholesaler
you have to count all of the sales of your products all of the money that you
make from that if your products happen to not be subject to tax then you just
don't charge your customers tax and you don't remit it but that doesn't have
anything to do with whether or not you're meeting those those Nexus
thresholds that we were talking about before so if you're if all of the
products that you're selling are exempt from tax and you're selling 10 million
dollars worth then chances are you're going to need to
register file for sales tax even if you don't collect and remit that tax so the
next question is can't Amazon just collect everywhere for me so some of you
may know already that Amazon will collect and remit the sales tax in
Washington State and in Pennsylvania and soon they're going to be doing that in
Oklahoma as well so a lot of people feel like yay now I don't have to worry about
Washington or Pennsylvania or soon-to-be Oklahoma and here's the problem with
that all that Amazon is doing is collecting and remitting the sales tax
it is not filing the tax returns for you it is not including any sales tax that
you may have collected on Shopify or eBay or big commerce or anywhere else so
you still have this filing obligation regardless of who's collecting and
remitting the sales tax so what's going to end up happening is when you file
your sales tax returns you're gonna say hey Amazon paid in this much I paid in
this much here's the amount that's due or overpaid or it's just right and
that's how you're gonna get your returns filed so it doesn't actually make things
any easier at all if anything I'd say it makes things a little bit more complex
so then the next question is all right so I've gotta go look at all these rules
all the individual rules for each of these 45 states and I have to figure out
who I need to collect and remit tax and I need to figure out how to get that all
filed and stuff and then I file it and I've paid all the registration fees and
I pay whatever other fees come up and then what my nightmare my this super
expensive administrative annoyingly painful process is over right I hate to
break it to you but chances are the states are going to start coming after
you for income tax or franchise tax so this is going to be a huge problem for
years to come unless Congress steps in and does something different so I hate
to break it to you but the nightmare is just beginning
okay so last question where can I go for help if you've been reading any of the
articles watching any videos or anything they're probably all advising you to go
to a sales and local tax expert we advise the same thing we are not
actually sales in the local tax experts we know a lot of about it because it's
really important to our customers and all we do is ecommerce so so we're super
tuned into this process and everything but if you have questions on your
particular situation you definitely need to go see an actual sales and local tax
expert we have links to some of our favorites down below we also have links
to some tools that can help aid you in the filing process Avalara taksa fight
axe your those are the big three so there are links to those down below as
well we also have a download you can get to a link to it down below and it's it's
basically a spreadsheet that gives you the general rules as of today in all
these different states what their thresholds are and things like that
you'll definitely want to check in with a sales and local tax expert a salt
expert to make sure that you're doing things the right way if you are at all
confused about the process or need some help navigating the waters so I hope you
like this video and that it helped if you did like it please show us some love
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