Sales & Use Tax: The Basics
If you’re a new business owner, you may not be familiar with use tax. Most consumers are familiar with sales tax, since they have to pay it when they make purchases. So, you likely know you have to collect sales tax for purchases in your state and forward these collections to the state in the form of ecommerce sales tax returns and sales tax reports.
But you may be less familiar with use tax. A use tax is what you charge customers in other states. For instance, if the tax rate is 6% in your state and 6.5% in your customer’s state, you must charge them the higher rate. This necessitates your keeping an up-to-date list of every state’s sales tax rate.
Additionally, some jurisdictions levy a county, city, town or township tax rate as well that you have to add to the state tax. Many states also require sales tax registration for any business selling items in their state, even if it is only online. SalesTaxSolutions.US is available to business owns and accountants to field questions about sales and use taxes, and sales tax registration, and we usually can provide an answer within 24 hours.
However, a better solution for a busy ecommerce site that has customers nationwide might be a sales tax system.
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What Is a Sales Tax System?
There are many ways to set up a sales tax system, and the one you choose depends on how you run your business, what you sell and where your customers are. You likely have bought items online from sellers in other states and seen that the sales tax was automatically calculated at the rate in the state you are in. This is one reason you often have to fill out your address before you can see the amount of the sales tax.
While this seems like a simple calculation, there are variables. For instance, in many (but not all) states, some items are not subject to sales tax, such as food, clothing and medical devices. But there are exceptions. Prepared food is treated differently from groceries. Scarves and headbands are sometimes considered accessories and not clothing and may be subject to tax.
As you can see, these rules can be complicated and befuddling. At SalesTaxSolutions.US, we can design a system to manage your sales and use tax liabilities effectively. This includes policies, procedures and recommendations for software and other computer solutions.
Count on the experience of the team at SalesTaxSolutions.US to help you stay in compliance with ecommerce sales tax system design.