Avoid Sales Tax Surprises - SYST Business

Avoid Sales Tax Surprises

Avoid Sales Tax Surprises: 9 Point Compliance Checklist

There are now more than 11,000 sales tax jurisdictions across the U.S.

Complying with this complex jurisdictional matrix, each with its own set of rates, regulations and forms can be nothing less than a nightmare for smaller ecommerce businesses.

To make online retailers aware of the most important considerations, Small Business Trends conducted an exclusive interview, conducted by phone, with Chris Livingston, Director of Operations and Product Management at VertexSMB, a company that provides sales and use tax automation software for small to medium-sized businesses.

Livingston outlined the following nine considerations in this sales compliance checklist:

Sales Tax Compliance Checklist

1. Know Your Nexus

The most important compliance factor comes with knowing your “nexus.”

Nexus Defined

Nexus — also known as “sufficient physical presence” — is the term used to determine whether or not a business selling products in another state is liable for collecting sales or use tax in that state.

Nexus is required before a jurisdiction can impose taxes on an entity. Therefore, it is vital that ecommerce businesses know the states in which they have sufficient physical presence…..

What Constitutes ‘Physical Presence’

The physical presence nexus requires can include things like having office space, employees, a warehouse, affiliates, inventory or drop shipping from a third-party vendor in another state. In some jurisdictions, even having a billboard alongside the highway could constitute nexus, Livingston said….

Click-through and Affiliate Nexus

With the onset of ecommerce, many states have passed “click-through nexus” and “affiliate nexus” legislation to impose taxes on sales made by online retailers.

According to an article on the Sales Tax Institute website, click-through nexus legislation typically requires that a remote seller “meets a minimum sales threshold in the state in question resulting from activities of an in-state referral agent…..

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