Sales Tax

[jttheclockman]

Just curious for those that sell their products, I was wondering how you handle the State Taxes. I do believe that sites like Ebay and Etsy and probably Amazon help with this situation. I would like to hear honest answers from those that sell. If you have your own web site, do certain pay as you go platforms such as Paypal and others handle the state tax things when it comes to collecting sales tax from different states? Or do you have to set up some other method to do this? Do you send the sales tax from each state that you made a sale from, to them and how is this done? What about out of country. What I am getting at is in NJ we have a sales and use tax and when I was doing shows it was very easy to keep tract of my sales and report and send taxes to the state because it was only my state involved. But if I want to become an online seller, what is the best method to handle this. This sounds confusing. If you are a big time vendor and sell lots of product it has to be a chore to keep tract of this. Is this done monthly, quarterly or some other way? How do you report this and to whom do you report to if anyone? I am familar with the business tax ramifications and what needs to be recorded for tax purposes but the State Tax thing has me confused. Hope I am asking the question correctly. Thanks. Any other tidbits you want to throw in the conversation, please do.

 

[derekdd]

I build sales tax into my selling price. That way no extra step at the point of sale.

Since we run everything through Square (both onsite at craft shows & online store), it generates sales reports for us, and I submit payment via Paypal to WI a couple of times per year via a self serve portal. I believe I'm not responsible for out of state sales tax for buyers purchasing via our online store. I just pay WI as if we had a brick and mortar store.

Our tax prep professional agrees with this approach. Easy peasy.

 

[jttheclockman]

I build sales tax into my selling price. That way no extra step at the point of sale.

Since we run everything through Square (both onsite at craft shows & online store), it generates sales reports for us, and I submit payment via Paypal to WI a couple of times per year via a self serve portal. I believe I'm not responsible for out of state sales tax for buyers purchasing via our online store. I just pay WI as if we had a brick and mortar store.

Our tax prep professional agrees with this approach. Easy peasy.

Well my tax accountant does not agree because I just had taxes done yesterday and when I explained some sales I made via the internet she immediately asked if I took in the sales tax. I too always include sales tax in purchase price to make things simple and not have to deal with pennies. Did that all my times on the selling circuit. But she told me that when a sale is made out of state you must remit the sales tax back to that state. No matter how you collect it. This is where I would like to get solid answers if I decide to take that ride down the sales route through on-line sales. Thanks.

 

[RKB]

This is a very interesting post. Hopefully we some good information posted.

 

[Alan Morrison]

Where I am the Tax office allow sales of £1000.00 p.a. before having to declare.

 

[jttheclockman]

Where I am the Tax office allow sales of £1000.00 p.a. before having to declare.

I brought this point up also thinking there was a sales limit number. She said no.

 

[dwkern]

I'm from Illinois and report my sales tax to the Illinois Dept of Revenue totally separate from any other taxing body. I requested and received a tax ID number for reporting the taxes I collect. But I also use this number to buy wholesale - without paying taxes on purchases - so long as those purchases are used for the business. On my reporting form I have a number of places to report sales. The two main categories pertinent to this thread are "Inside Illinois" and "Outside Illinois". There is no place to document where outside of Illinois the taxes were collected, so Illinois keeps this tax. I believe every state does this. Note the "Inside Illinois" include county and local taxes whereas the "Outside Illinois" only collects the state portion of the sales tax. Confusing? Absolutely!! Hence book keepers and accountants!! !-) Initially the state requested I file monthly, but after a few months of zeros they changed to quarterly and finally yearly. You can tell I don't sell a lot of pens!! I'm like the rest of you - I give them away! What a poor business plan! LOL!

Now I don't sell via my website but if I did, it would be considered "Inside Illinois" -- as that's where I'm selling from. Likewise with Etsy or Ebay. Etsy and Ebay do not help with this accounting to my limited knowledge. It's up to you. When I do sell I include the tax in the sale price to minimize confusion and "reverse" calculate the sales tax. I sell a few pens wholesale - which requires me to account for this sale also - by obtaining the retailers tax ID info. It is complicated but with the assistance of my accountant I got the hang of it after a year then took this task on myself.

This is so, so simple I now realize it's actually smarter to give the stinking pens away!!! LOL.

I hope this helps a little.

 

[RGABEL]

I believe most states (if not all) require the seller to collect the tax and remit to the state. In the past the individual was responsible for declaring out of state purchases when doing taxes but when online purchasing grew exponentially the states quickly learned that not everyone was honest with their online purchases.

I am not currently doing out of state sales so I do not have a definitive answer, but I would start with the state's government website to see if they have any information on this. The challenge will be determining all of the different rates if you want to adjust the sale price based on the tax %. May not be a big deal on smaller items, but larger sales it can really add up. For example Los Angeles and TN are 9.56% and 9.55% vs DE, MT, NH, and OR that have no sales tax.

 

[rixstix]

I realize that some CPA type people don't understand that many, if not all, states have a minimum threshold for collecting sales tax. It has been 4 years for us but at that time, our sales did not exceed any of the states minimums for tax collection. Not even California. We did have to collect, report and pay state sales tax for our customers living in our state of residence. The amount was so low that we qualified for a single annual report/payment.

We did have to cease sales to EU countries since the minimum was $0 dollars for International sales. There was a 'carve-out' exception that we could use for the UK.

Etsy and others now have that built in and they take care of all collections, reporting and payment.

FWIW, there are over 10,000 different tax authority jurisdictions to keep track of once you put state, county, city (and other) jurisdictions into play.

Here's an example:

Effective August 1, 2019, Ohio enacted substantial nexus statutes when a seller has at least 200 transactions or $100,000 or more in gross sales into Ohio. With this change in statutes, a seller making sales into Ohio may have a requirement to collect Ohio (seller's) use tax without a physical presence in this state

 

[jttheclockman]

Dale hit alot of the same points I brought up to her. I understand all about the Tax ID number and collecting sales taxes in NJ because I have done this for over 35 years but it was just in NJ because that was where all my shows were. I pay the state quarterly or at least I figure out if there is any. But I do it anyway and she even said just make sure you write 0 down when filling them out quarterly. My big sales are in the last quarter because of Christmas holiday sales. When I was in 6 stores selling it was a year round thing. I do believe there is minimum $$ intake in each state. I do not sell much any more and give much more away. But I just started thinking the on line sales maybe a way to unload the inventory that I have and boy do I have alot. Not only pens but scrollsawn work too.

But if I have to trace down and collect taxes from individual states that is not going to fly and just not worth it. I do know some of these selling platforms like ebay and etsy do handle taxes because they charge a fee for that stuff. But that would be the place i probably would try to sell my stuff as opposed to setting up a web site. I am not computer literate or savy so that would be out. I just wanted to see if people who do own their web site how they handle it and if they are honest about it.

The point that someone brought up about selling through your state is and was my way of thinking also. I am making and selling the product here in NJ. Why not collect NJ tax. Why do I need to send other states money for something they have no input to. I do not understand.

 

[rixstix]

John, generally speaking, the destination is the location of the tax authority; not the selling or ship from location. It all comes from a US Supreme Court decision with WayFair.

Another example of minimum threshold is if I were to sell to someone in NJ from my SD store.... the NJ rule/threshold for me would be

Economic Threshold. For sales made on and after November 1, 2018, a remote seller must register, collect, and remit New Jersey Sales Tax if the remote seller meets either of the following criteria (the economic threshold):
1. The remote seller's gross revenue from sales of tangible personal property, specified digital products, or services delivered into New Jersey during the current or prior calendar year, exceeds $100,000; or
2. The remote seller sold tangible personal property, specified digital products, or services delivered into New Jersey in 200 or more separate transactions during the current or prior calendar year.
A remote seller that does not meet either of these criteria does not have to register with the Division of Taxation to collect and remit New Jersey Sales Tax.

 

[jttheclockman]

John, generally speaking, the destination is the location of the tax authority; not the selling or ship from location. It all comes from a US Supreme Court decision with WayFair.

Another example of minimum threshold is if I were to sell to someone in NJ from my SD store.... the NJ rule/threshold for me would be

Interesting!!! I assume this is something each state has some form of this writing. What would it be if the players were reversed in your example??

 

[rixstix]

Interesting!!! I assume this is something each state has some form of this writing. What would it be if the players were reversed in your example??

Essentially the same. Seems to be a 'nothing burger' as far as small time, Mom/Pop online sales go. Something accountants SHOULD already know.

 

[rixstix]

Here is a link to a list of the requirements by state. I didn't see anything less than $100,000 remote sales per year.

Remote Sales Tax threshold by state

 

[jttheclockman]

Here is a link to a list of the requirements by state. I didn't see anything less than $100,000 remote sales per year.

Remote Sales Tax threshold by state

Thank you for your effort to find this for me. I will be seeing her at the end of the month again because we have a few things to go through yet. I will do some more research but will copy this also. I like what you shown. Thanks again.

 

[dogcatcher]

South Dakota vs Wayfair changed the rules.


https://www.nfib.com/out-of-state-sales-tax-requirements/

After Wayfair, states may require remote sellers to collect and remit taxes if the seller has a "substantial nexus with the taxing State[,]" which need not be a physical presence within the State.

 

[sorcerertd]

I sell on Etsy pretty much exclusively. They can be a pain, and the fees add up, but it's just convenient and there is plenty of traffic. Etsy collects state taxes on all sales and pays them to the state without me having to do anything. I just file a $0 due statement quarterly for those sales. Anything local I have to pay, but that's another story.

What I find sad is that the federal threshold for paying social security on my profit is only $400. You'd think they could at least make it $1,000. But, once I'm over $400, I have to pay 15% of it to social security. I have not looked at the threshold again this year, but I doubt they will have raised it.

 

[darrin1200]

Here is a link to a list of the requirements by state. I didn't see anything less than $100,000 remote sales per year.

Remote Sales Tax threshold by state

Thanks for this. As I understand it this applies, to all sellers including international like myself.