Pat Riley, TaxCloud’s VP of Business Development, recently hosted an Ask Me Anything (AMA) on Reddit, dishing out tips and support to help ecommerce and remote sellers cope with the sales tax landscape. Before we get into a recap of the Q&A, we need to set the record straight: he’s not the Pat Riley who owns the Miami Heat.
Q: Any tips for ecommerce sellers who are just starting out?
A: First, always understand where your sales tax obligations are. You need to collect sales tax in any state where you have a physical presence (nexus) and where you have economic nexus, which is determined by the amount of business activity you conduct in a state.
Here are some other things to keep in mind:
- If you ship your product, see if the platform has built-in shipping and how that affects your taxes.
- Confirm how to manage exemption certificates, if applicable, in the states where you have nexus.
- Research if you need licensing in the states where you have nexus.
- You’ll also need to know sales tax at the local jurisdiction level, not just general state sales tax.
- Look into whether or not you qualify for flat-rate programs like the Alabama Simplified Sellers Use Tax (SSUT) program.
- Look out for special taxes beyond sales tax. For example, the Washington Business and Occupation (B&O) tax.
- Make sure you know your remittance deadlines. Each state has a different timeline for when they’re due that’s based on your registration. This can change if your sales go up.
- Many states are changing the economic threshold requirements. Make sure to monitor these. (The good news is that most are removing the transaction threshold so that it’s based solely on sales.)
- Depending on the state, sourcing (origin and destination of the sale), type of product, and your customer, you might not need to calculate sales tax (yet).
- You can easily remit sales tax returns with each state’s Department of Revenue online portal. Just know that it’s a separate portal for each state and they all require different information in different formats.
- Shipping taxability varies based on the shipping method. Do you charge shipping and handling or is it separated out? That can be the difference between charging tax or not.
Q: I do SUT audit defense, refunds, and compliance, but most of my work is in two states. Which states do you think have adapted to Wayfair’s best/worst? What did you do before Wayfair?
A: Since we’re in the sales tax compliance world, Wayfair didn’t affect us much. To be honest, it brought in more business.
However, we did see lots of confusion from merchants we work with. A lot of people understandably wanted quick advice. Some people went out and registered everywhere. Others didn’t want to register at all. We also saw an uptick in SST registrations.
Any state that has a seller’s use or simple program for out-of-state sellers has been the easiest to work with by far.
Q: What’s the best advice you have for remote sellers?
A: The first step is to understand where your sales tax obligations exist. You must collect sales tax in any state where you have nexus, whether physical or economic, which is determined by the amount of business activity you conduct in a state.
We have guides to sales tax nexus by state.
Q: How long would it take a regular 35-year-old Jane or John to have 80% of the sales tax domain knowledge as you?
A: The broad strokes of sales tax aren’t overly difficult to master. Things like nexus, who pays the sales tax, and what products/services are taxable are pretty easy to understand.
The complexities come from the variations in sales tax law among the 46 states that have sales tax. You get into product-based exemptions, buyer-based exemptions, rules around destination-based taxation vs. origin-based taxation, and much more.
Like anything, acquiring knowledge is a journey and sales tax is no different than anything else.
Thanks, Pat for your answers! And we agree, George Clooney would have been much better in the role In Winning Time!
Have more sales tax questions? We’ve got more answers. You can ask us anything anytime, just get in touch.