As a business owner, in the beginning of a new year it is worth to take time to evaluate what went wrong or right during previous year. Later you may understand how to work smarter not harder! One of the most important thing you must consider if you have a business on Amazon, it is Amazon sales tax. You need to know all details in order to feel confident that you are doing sales tax “correctly”.
Just keep in mind; if you are spending more than a few minutes per sales tax filling, then you are probably spending too much time on an administrative activity that does not make your business a profit. If something went wrong during last year, before you can fix the problem you must first know what it is!
Figure out where you have Amazon sales Tax Nexus
What is Sales Tax Nexus? It is a legalese connection to a state or country and every state’s nexus laws are different. It is created in the following steps:
- Location can be a place of business
- Personnel can be a person doing work for your business
- Inventory is usually stored in the state and it causes nexus even if you have no other places of business or personnel
- Affiliatesis the process when someone advertise your products and it creates nexus
- Drop Shipping is the process when you have a third party ship to your buyers and that may create nexus
- Sell products temporarily can also cause nexus
If you find that you have a sales tax nexus in a new state, you should register for a sales tax permit for that state and start collecting sales tax. This step is very important and you should not skip it, because collecting sales tax without a permit is illegal and state think that you are keeping their money for yourself.
It is possible that you have stopped doing certain business activities that gave you sales tax nexus. If you find that you do not have nexus in a state anymore, you may cancel your sales tax permit in that particular state. You should double check with the state to make sure they do not have any trailing nexus and this may request to pay sales tax for months even after your nexus has been canceled.
Once you have cancelled your sales tax permit in a state, do not forget to stop collecting sales tax from buyers in that state, because often sellers does the same mistake.
How often you must do sales tax filing?
You will be assigned by state to pay sales tax either monthly, quarterly or annually. The frequency would depend on one factor. States usually assign to file and pay taxes more often if you are a high-value seller.
Know the deadlines of your Amazon Sales Tax filing!
Next step after knowing of your sales tax filing frequency, you should know the deadlines of your sales tax filing. Check those deadlines for your state or country, because it is very important if you do not want to have penalties later on!
What is your Sales Tax Process as an Amazon Seller?
Are you spending too much time on your sales tax returns? There can be several reasons! First, maybe you sell on multiple channels and have a hard time reconciling all of your sales. Second, probably you find yourself spending hours filling out your sales tax amounts collected within in each state, county, city and special taxing district.
One of the solution is using sales tax automation solution in order to make your sales tax life simple. You can connect online shopping carts/marketplaces and receive a sales tax report with your sales just the way your state or country wants to see them.
Sales tax is a necessary part of your business, but it does not make you any money. If you’re spending too much time on sales tax, try automating it so you can focus on running your business.