Sales Tax Changes 2024

Running an ecommerce business these days requires near constant effort to keep up-to-date with the evolving sales tax landscape. Just like in 2023, which saw tens of thousands of sales tax changes, 2024 is set to see a number of sales tax laws shift. That includes everything from more state-specific sales tax holidays, new sales tax laws, sales tax rate changes, additional sales tax exemptions, and more.  

Join us as we kick off 2024 by running through the new sales tax laws in 2024 state by state so you know what to expect this year. We’ll focus on changes to state sales tax law but there might be other changes to local or municipal sales tax laws in the states you do business in. If you want to make sure you’re on top of all the sales tax law changes without having to do all the leg work – TaxCloud can help! 

Alabama 

There are no 2024 Alabama sales tax laws or changes as of January 2024. 

Alaska

There are no 2024 Alaska sales tax updates as of January 2024. 

Arizona 

There are no 2024 Arizona sales tax updates as of January 2024. 

Arkansas 

In 2024, Arkansas has one main sales tax update at the state level. Businesses that gross an average of $5,000 in tax liabilities or more in the previous year are required to file all returns and remittances electronically starting January 1, 2024. 

California 

In 2024, California has no major sales tax updates but as of January 1, 2024, some beverage distributors and manufacturers are required to pay a recycling fee under the California Bottle Bill Act. The amount is between $0.05 to $0.25 depending on the size and type of bottle. 

Colorado 

There are no 2024 Colorado sales tax changes as of January 2024. 

Connecticut 

There are no 2024 Connecticut sales tax changes as of January 2024. 

Delaware 

There are no 2024 Delaware sales tax changes as of January 2024. 

Florida 

On January 1, 2024, Florida fuel tax rates on motor fuel and diesel fuel increased from 20.2 cents per gallon to 21 cents per gallon. These increases are part of a set of annual adjustments since Florida tax law requires annual adjustments to state fuel tax rates.  

Georgia 

In Georgia, 2024 sees sales tax changes to digital products, which will no longer be exempted from the state’s 4% sales tax as of January 1, 2024. Not all types of digital products will be taxed. Georgia’s sales tax update specifies that it only applies to digital audio-visual works, digital audio works, or digital books. 

That includes: 

  • Artwork
  • Photographs
  • Periodicals
  • Newspapers
  • Magazines
  • Video or audio greeting cards
  • Video games or electronic entertainment 

Hawaii 

In 2024, Hawaii is instituting a new excise tax of 70% of the wholesale price assessed on electronic smoking devices and liquids. 

Idaho

There are no 2024 Idaho sales tax changes as of January 2024. 

Illinois 

There are no 2024 Illinois sales tax changes as of January 2024. 

Indiana 

There are no 2024 Indiana sales tax changes as of January 2024. 

Iowa 

There are no 2024 Iowa sales tax changes but on December 31, 2023, a sales tax exemption for purchases of computer peripherals by insurance companies, financial institutions, and commercial enterprises expired meaning that these entities will not have to pay Iowa’s sales tax. 

Kansas 

Kansas changed its sales tax return filing requirements on January 1, 2024. Now, a retailer who collects more than $1,000 but less than $5,000 in Kansas state sales tax in a calendar year can file and remit their returns annually. Before this Kansas sales tax law change, the threshold for filing an annual return was between $400 and $4,000 in a calendar year. 

Kansas also changed its sales tax rate for food and food ingredients from 4% to 2% starting on January 1, 2024. 

Kentucky 

There are no 2024 Kentucky sales tax changes as of January 2024. 

Louisiana 

There are no 2024 Louisiana sales tax changes as of January 2024. 

Maine 

Maine is cracking down on vaping with a 43% excise tax on the wholesale price of electronic smoking devices and liquids. 

Maryland 

There are no 2024 Maryland sales tax law changes as of January 2024. 

Massachusetts 

There are no 2024 Massachusetts sales tax law changes as of January 2024. 

Michigan 

While there are no major sales tax updates in Michigan in 2024, January 1, 2024, marks a change in the state’s gasoline and diesel monthly prepaid sales tax rate as occurs month. The amount tax decreases to 17 cents per gallon of gas and 22.5 cents per gallon of diesel. 

Minnesota 

Minnesota has no changes on sales tax rates in 2024 but the state’s cigarette sales tax has increased to 73.9 cents per pack of 20 cigarettes. 

Mississippi 

There are no 2024 Mississippi sales tax changes as of January 2024. 

Missouri 

There are no 2024 Missouri sales tax changes as of January 2024. 

Montana 

There are no 2024 Montana sales tax changes as of January 2024. 

Nebraska 

There are no 2024 Nebraska sales tax changes as of January 2024. 

Nevada 

There are no 2024 Nevada sales tax changes as of January 2024. 

New Hampshire 

There are no 2024 New Hampshire sales tax changes as of January 2024. 

New Jersey 

There are no 2024 New Jersey sales tax changes as of January 2024. 

New Mexico 

There are no 2024 New Mexico sales tax changes as of January 2024. 

New York 

In 2024, New York State will be reducing its fuel tax rates to 17.3 cents per gallon of motor fuel and 15.55 cents per gallon for diesel. 

North Carolina 

There are no 2024 North Carolina sales tax changes as of January 2024. 

North Dakota 

There are no 2024 North Dakota sales tax changes as of January 2024. 

Ohio 

In 2024, Ohio’s Commercial Activity Tax (CAT) will undergo significant changes. The tax is imposed on companies doing business in Ohio and measured by the gross receipts from business activity in the state. For tax periods that begin on or after January 1, 2024, the annual minimum for the CAT has been eliminated and the exclusion amount has been increased from $1 million to $3 million in gross receipts. 

Oklahoma 

In 2024, Oklahoma eliminated its state franchise tax. The tax was previously levied at a rate of $1.25 per $1,000 of capital allocated or employed in Oklahoma. 

Oregon 

Oregon has increased its fuel tax rates in 2024. As of January 1, 2024, the fuel tax is now 40 cents per gallon for motor vehicle fuel and diesel fuel. 

Pennsylvania 

There are no 2024 Pennsylvania sales tax changes as of January 2024. 

Rhode Island 

There are no 2024 Rhode Island sales tax changes as of January 2024. 

South Carolina 

There are no 2024 South Carolina sales tax changes as of January 2024. 

South Dakota 

There are no 2024 South Dakota sales tax changes as of January 2024. 

Tennessee 

There are no 2024 Tennessee sales tax changes as of January 2024. 

Texas 

There are no 2024 Texas sales tax changes as of January 2024. 

Utah 

On January 1, 2024, Utah increased its motor fuel excise tax rate from 34.5 cents per gallon to 36.5 cents per gallon.

Vermont 

There are no 2024 Vermont sales tax changes as of January 2024. 

Virginia 

There are no 2024 Virginia sales tax changes as of January 2024. 

Washington 

There are no 2024 Washington sales tax changes as of January 2024. 

West Virginia 

There are no 2024 West Virginia sales tax changes as of January 2024. 

Wisconsin 

There are no 2024 Wisconsin sales tax changes as of January 2024. 

Wyoming 

There are no 2024 Wyoming sales tax changes as of January 2024. 

How to Keep Track of Sales Tax Law Changes

Now that you’ve caught up on all the 2024 sales tax law changes implemented on January 1, 2024, you might think you have all the info you need to handle sales tax in 2024 like a pro. Not so fast! States can make changes to their sales taxes during the year as well. Whether they’re decreeing a new sales tax holiday or creating a new sales tax exemption, there are a number of sales tax changes that can be implemented during the year – sometimes with little advance notice. 

So, how do you stay up to date? The easiest way is to let TaxCloud keep track of your sales tax for you. We can handle everything from calculating your sales tax to filing and remitting your taxes. We keep on top of any changes to sales taxes so you don’t have to. 

Get in touch to learn how we can help! 

How to Calculate Sales Tax: Ecommerce Edition

Ecommerce Sales Tax in the USA

While the best thing about selling online is that it allows businesses to expand their customer base, all those far flung sales can also lead to significant tax complexity. Online businesses don’t have to charge sales tax in states they’re not physically operating in until they’re considered to have achieved what’s known as ‘economic nexus’ in those states.

How does an ecommerce company achieve economic nexus?

They have to meet certain tax thresholds such as the number of sales or amount of total sales which vary from state to state. 

Once a business has met those thresholds, it then has to calculate its ecommerce sales tax. But calculating sales tax for ecommerce companies can be complicated. Not only does each state have different sales tax rates but many have items that are exempt from sales taxes or taxed at a lower rate. So, how do you know you’re calculating the right online sales tax amount for each customer so you can ensure your sales tax compliance? 

We’ll walk you through how to determine when you need to charge and calculate ecommerce sales tax, how to calculate it, and we even have a sales tax calculator to help you understand how online sales taxes work! 

Do I need to collect sales tax for selling online? 

Whether or not you need to collect online sales tax depends on whether your business has reached nexus – or connection –  in the states your customers are buying from. 

If your business has a physical presence such as a store, office, or warehouse in a state, you’re typically required to collect sales tax for transactions within that state if that state has a sales tax. With the popularity of online stores, the definition of a sales tax nexus evolved beyond physical presence. Your store might not physically be in a state but you might have what’s known as ‘economic nexus’ there, depending on your sales revenue or transaction volume. 

What qualifies you for economic nexus in each state varies. As an example, in North Dakota, you’ll reach economic nexus once you’ve sold $100,000 worth of goods to customers in that state. In Texas, however, you won’t reach economic nexus until you’ve sold $500,000 worth of goods to customers in that state. Kentucky calculates economic nexus slightly differently and requires businesses that have $100,000 in sales or 200 transactions in that state to collect sales tax.  

That means that you have to keep track of your sales and transaction volume in every state to ensure your sales tax compliance. You can look up the requirements for each state here

How to calculate sales tax

Whether you’re selling mugs with photos of your customers’ pets on them or replacement parts for microwaves, the steps for calculating sales tax are the same. 

Here’s how to calculate ecommerce sales tax accurately and ensure sales tax compliance for your business:

Determine Nexus

As discussed above, understanding where your business has economic nexus that requires you to collect sales tax is the first step to calculating ecommerce sales tax. Once you know everywhere you need to collect sales tax, you can ensure that you’re properly charging sales tax to your customers. 

Register for Sales Tax Permits

Once you determine where your business has nexus, you’ll need to register for sales tax permits with the respective states’ tax authorities. This typically involves submitting an application and obtaining a permit or license to collect sales tax within that state.

Categorize Your Inventory

Categorizing your inventory is required to properly calculate ecommerce sales tax. Some states make certain items tax-exempt or charge a lower sales tax rate on others. For example, diapers are tax-exempt in New York State whereas agricultural seeds are tax-exempt in Alabama. In Virginia, you’ll only need to charge 1% on things like personal hygiene products and groceries but you’ll have to charge the full sales tax rate of 5.3% on everything else. 

If you only sell one type of item, categorizing your inventory will be easy. However, if you sell items across many product categories this step could become complicated – especially if you need to charge sales tax in many jurisdictions with different sales tax exemptions. 

Calculate Sales Tax

Each state has its own sales tax rates, which might vary further based on local jurisdictions since some cities charge additional sales taxes. Integrate an ecommerce sales tax calculator tool or an ecommerce sales tax software that can accurately calculate the applicable tax rates for each transaction based on the customer’s location during checkout. 

Many ecommerce platforms offer integrations with tax calculation services to streamline this process. For example, on Shopify, you can use TaxCloud’s Simple Sales Tax app to integrate TaxCloud directly into your online store. The right tech can make figuring out how to calculate sales tax for ecommerce stores so much easier. 

Collect Tax Exemption Certificates

For those exempt from sales tax such as resellers or tax exempt organizations, consider offering them a way to purchase from you tax-exempt by collecting and maintaining valid exemption certificates to support tax exempt transactions.

Remit Collected Taxes

You’ll then have to remit your collected taxes and file your sales tax return with every state you collect sales tax in on a monthly, quarterly, or annual basis depending on the state and your company’s filing obligations. Be sure to pay attention to deadlines and reporting requirements for each state. Not sure where to find this information? Don’t worry – TaxCloud does a monthly blog series that lists the filing dates in each state so you don’t miss one. 

Keep Detailed Records

Be sure to maintain accurate records of sales transactions, tax collected, exemptions, and any other relevant documentation. Record-keeping is crucial for audits or in case of any discrepancies.

Given the complexities and variations in sales tax laws across different states, using an automated sales tax calculation software like TaxCloud can streamline the process and ensure sales tax compliance with all relevant regulations. 

TaxCloud’s Ecommerce Sales Tax Calculator

Understanding the ins and outs of sales tax can be overwhelming. To help you get started on what we’ve outlined so far, we encourage you to check out our interactive ecommerce sales tax calculator. While you can’t use it to charge tax in your online store, it’s great for those new to calculating online sales tax or for those who just want to learn more about how complex sales tax is. 

Use it to look up your sales tax obligations in states where you have economic nexus or are about to reach it. Or use it to learn more about the sales tax thresholds of different states via our interactive map. We also share sales tax guides for every state! It has the answers to anything and everything you want to know about ecommerce sales tax. 

What happens when a business doesn’t pay sales tax? 

When your business fails to pay the required sales tax or pays the wrong amount because you calculated sales tax inaccurately, it can lead to a number of consequences that you very much don’t want. These consequences depend on the severity of your non-compliance. For example, if you failed to pay $100 in sales tax you’re not going to face the same consequences as if you failed to pay $1 million in sales tax. What happens will also depend on the jurisdiction’s tax laws. 

Here are some potential repercussions:

Sales tax penalties and Interest

Initially, your business may face penalties and interest fees for late or unpaid taxes. These penalties can accumulate over time and can be subject to interest, significantly increasing the amount owed.

Sales tax fines and Liens

Tax authorities can impose fines or issue liens against your business’ assets. Liens can affect the business’s ability to obtain credit or loans or affect your ability to land large customers who might do a credit check before signing a contract with you. It could even lead to the seizure of your business’ assets to satisfy the tax debt.

Legal Action and Audits

If you continue not to pay or evade your sales tax obligations that could lead to legal action. Tax authorities could initiate audits to investigate financial records and practices. Audits aren’t just time-consuming, they can also be costly and lead to additional penalties if discrepancies or deliberate non-compliance are found.

Revocation of Your Business License

In extreme cases, continued non-payment or flagrant disregard for tax obligations can lead to your business license being revoked. 

Personal Liability

If you run a small business or sole proprietorship that’s not incorporated, the business owner might be held personally liable for unpaid sales taxes. This can put your personal assets at risk.

Criminal Charges

Deliberate or severe cases of tax evasion can lead to criminal charges against the business or its owners, potentially resulting in fines, imprisonment, or both.

While that paints a pretty alarming picture, the good news is that not everyone who pays their ecommerce sales tax late or calculates their ecommerce sales tax incorrectly ends up in prison or has their business license revoked.  

Still, no business wants to face sales tax compliance issues since they can quickly add up with fines, interest, and penalties. Businesses must prioritize tax compliance, keep accurate financial records, and address any tax issues promptly to avoid facing these repercussions.

Ensuring sales tax compliance with TaxCloud

Simplifying the process of calculating sales tax for ecommerce stores is what we do at TaxCloud. TaxCloud’s sales tax software is essential to ensure sales tax compliance and reduce the risk of errors when calculating and remitting sales tax. 

Not only does TaxCloud integrate with your existing ecommerce platform (like Shopify, BigCommerce, WooCommerce, and more!) to calculate taxes for you but it keeps tabs on which states you’ve achieved economic nexus in – and which you’re about to. 

Here’s how TaxCloud helps:

  • Accurate Tax Collection: TaxCloud’s real-time sales tax calculator calculates sales taxes across over 13,000+ US jurisdictions to ensure your sales tax calculations are accurate, significantly minimizing the potential for errors in charging the correct tax amounts.
  • Proactive Threshold Alerts: With TaxCloud, there’s no need to learn the complex economic nexus rules for each state yourself. TaxCloud’s software monitors thresholds and notifies you when you reach a point where registration and tax collection in a new jurisdiction are necessary.
  • Notifications on Tax Responsibilities: Stay updated on your tax obligations, eliminating the risk of missing crucial filing deadlines. TaxCloud gives you notifications of when and where you need to file taxes – or we can even handle tax filing and remitting for you. 
  • Effortless Tax Reporting: TaxCloud’s software generates comprehensive, ready-to-use sales tax liability reports for each jurisdiction. And it also recalibrates your sales taxes when returns are processed.
  • Audit Support and Documentation: In the event of an audit, TaxCloud will help you! With the documentation you need and support from our team, you’ll have everything you need to navigate the process effectively.

 

Streamline your sales tax reporting and filing today with TaxCloud.

 

Reddit AMA Recap With TaxCloud’s Pat Riley

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.

TaxCloud Interview: What Is a Streamlined Sales Tax Certified Service Provider?

Do you ever wish someone out there could figure out the tough sales tax stuff for you? If your business works with a Streamlined Sales Tax Certified Service Provider (CSP), there is. We talked to Tim Bennett, Director of Sales and Use Tax at the Kentucky Department of Revenue, to get the scoop on what CSPs do and why you’d want to work with one.

What Is a Streamlined Sales Tax Certified Service Provider?

A Streamlined Sales Tax Certified Service Provider is a company certified by the Streamlined Sales and Use Tax Agreement. A CSP can perform all the sales and use tax functions for a seller, except taking on the seller’s obligation to pay tax on its own purchases. Thanks to a CSP, a company can outsource the majority of its sales tax admin responsibilities.  

Tim has been a member of Kentucky’s Certification Committee. Every state that’s a member of the Streamlined Sales Tax Governing Board has a representative on the certification committee who plays a role in the CSP certification process. Certification committee members are part of the process from when a company applies for the final approval of the CSP’s contract. 

To become a CSP, a company needs “to prove that they can provide full CSP services and that they can do so accurately,” Tim says. 
According to Tim, aspiring CSPs must have appropriate internal controls, financial capabilities, and security processes. They also need to be able to transmit Simplified Electronic Returns (SERS) through their web service.

Certification isn’t a one-and-done process, Tim notes. He and other members of the Certification Committee keep tabs on CSPs to ensure they continue to provide the appropriate services to their clients. 

What Services Does a Streamlined Sales Tax Certified Service Provider Offer?

The services a CSP provides include:

 

  • Identifying taxable products and services
  • Determining the correct tax rate
  • Maintaining transaction records
  • Setting up and integrating its software with the seller’s
  • Preparing and filing tax returns
  • Paying sales tax to SST member states
  • Resolving audits from SST member states
  • Protecting seller’s privacy

 

If one or more SST state audits a business, “the CSP essentially serves in place of the taxpayer in dealing with the state(s) in those instances,” Tim says. Businesses can “also enlist the CSP to assist in the SST registration process,” but that decision is at the company’s discretion.

How Does One Continue to Be a Streamlined Sales Tax Certified Service Provider?

Certification is ongoing, Tim points out. At the end of every contract, the certification committee reviews the CSP and votes to recommend recertification (or not). 

Test Decks are a critical part of the process of certification and recertification. 

“The test deck uses the items on the taxability matrix to test whether the CSP candidate has the correct taxability for all these items,” Tim says.  “States also use the test deck to make sure the CSP candidate is correctly using the SST rates and boundary databases to return accurate sourcing results based on the addresses provided in the test deck. 

“To get approved, a CSP applicant must return the test deck with 100% accuracy.  Once a CSP has a contract with the SST Governing Board, they must run the test decks every quarter to assure they are still returning an accurate result.”

What Are the Benefits of Being a Streamlined Sales Tax Certified Service Provider?

Tim notes that there are benefits of certification for taxpayers, CSPs, and states. Since states compensate CSPs, businesses have reduced costs. They also have peace of mind that they are getting reliable sales tax results and that the CSP will be there to handle any audit concerns that come up. 

“Without CSPs, businesses would have to navigate registration, calculating tax, filing returns, and remitting the sales tax with the possibility that they may not do things correctly,” Tim says. They’d also have to deal with 24 separate states instead of a single CSP. 

States see similar benefits of working with CSPs, according to Tim. Thanks to CSPs, taxpayers who might have been hesitant to register and pay taxes do so. 

Finally, getting certified gives CSPs a seal of approval, which makes the provider more attractive to potential customers. 

Don’t leave your company’s sales tax up to chance. Work with TaxCloud, a CSP, and know we have your back. Sign up for an account with us today.

Sales Tax Audits 101

A sales tax audit is like a rite of passage. Your company will likely go through one at some point, even if you’re doing everything right. How stressful a sales tax audit is depends largely on how well you’ve prepared for it. 

Remember, getting selected for an audit doesn’t reflect your business’s morals or character. In many cases, it’s just a state checking in to confirm you’ve dotted all your I’s, crossed all your T’s, and paid all the tax you owe.

Direct Audits

Your business may owe sales tax in a state where you have a physical presence or economic nexus (aka connection). If your business has no presence in a state, you’ll generally not need to collect or pay sales tax there.

It seems easy-peasy, but it’s not. States can have differing rules for physical presence and different thresholds for economic nexus. Mess one of those up, and a state may come a-knocking with a direct audit. 

We’ve broken down all you need to know to get through a direct audit, including:

  • How to prepare
  • How to treat the auditor (be nice!)
  • What documents you need
  • What sampling is
  • How to appeal
  • What happens next

 

Streamlined Audits

The Streamlined Sales and Use Tax Agreement exists to make everyone’s sales tax lives a little easier, especially in a post-South Dakota vs. Wayfair world. Twenty-four states are full members of the Streamlined Sales Tax Governing Board and have passed legislation to make sales tax a little easier. 

Some of the protections passed by Streamlined states include liability relief if a business doesn’t collect the right tax amount because of a data error from the state or an error made by certified sales tax software. 

If your business uses TaxCloud, you get extra audit support in Streamlined states. We’re a Certified Service Provider (CSP), which means we have an agreement with each of the Streamlined states (and Pennsylvania). 

Those states can audit our records to ensure we collect, calculate, and report the correct sales tax amount. Often, the audits occur on a three-year cycle, but only some states audit us every three years.

Since we’re the company getting audited in this case, your business may not need to get involved at all. However, there may be instances when we must contact you to get some information to make the audit go smoothly. We may need to request the following:

  • Product mapping and descriptions
  • Purchaser’s addresses
  • Invoices
  • Return records
  • Exemption certificates

 

Having those documents and information handy and well-organized will help the audit go smoothly and may reduce the need for us to make a special request of your business.

TaxCloud Helps Ease Audit Pain

No one wants to be audited, but the process doesn’t have to be the stuff of nightmares. Using our certified sales tax software means you can be confident that the correct amount of tax is collected in each state for each transaction, reducing the risk of an audit. 

And, thanks to the Streamlined Sales and Use Tax Agreement and our status as a CSP, your business has liability protections if an error in our sales tax calculations triggers the audit.

TaxCloud can be right by your side, keeping audits at bay or taking the heat for your business if an audit does occur. Contact us today to learn more.

 

How TaxCloud Goes to Bat for Your Business

You’re looking for sales tax software that takes the pain out of calculating, collecting, and paying sales tax. But, if you operate an ecommerce business that sells to customers across multiple states, you need much more than that. You need a support system to ensure you’re collecting the right amount of tax and that sales tax rules don’t burden your business too much.

TaxCloud gets it. We’re a sales tax compliance solution for growing online businesses. We want to help you collect and pay sales tax, sure. But we do more than that. We stand up for the little guy and work to make sure states don’t introduce laws or regulations that hurt your business.

Dave Steines, our Vice President of Government Affairs, breaks down how we go to bat for small businesses.

We Work With States on Your Behalf

In a world of bureaucratic red tape, it helps to have an in. Consider TaxCloud your business’s “in.” We have direct contacts with Streamlined Sales Tax (SST) and state personnel, which helps us help you resolve any issues accurately and quickly. We work with states to address outstanding concerns, such as missing or amended item returns, correct tax treatment of products, and audit assistance. 

As a Certified Service Provider (CSP) with the SST program, we can manage state tax registration and renewals, exemption certificates, and sales tax filing for businesses that operate in an SST member state.

Our TaxGeeks are also actively advocating for online businesses. We participate in workgroups and committees with the SST to keep member states from changing the Streamlined Sales and Use Tax Agreement (SSUTA) in a way that negatively affects our merchants. 

We get that sales tax can be overly complicated, and the rules can be all over the place. That’s why we’re working hard to push states to simplify things, to ease up the burden on you.

We’re Looking Out for Your Best Business Interests

Our TaxGeeks work hard behind the scenes to protect the interests of the online retailers who use our sales tax software. We work directly with states to ensure that Taxability Information Codes (TICS) are correct and accurate. Merchants rely on TICs to limit their sales tax liabilities. 

South Dakota vs. Wayfair has had a massive impact on remote sellers, who now may have to collect sales tax in states where they don’t have a physical presence. We participated in a Wayfair Implementation Update Panel with the National Conference of State Legislatures (NCSL). We advocated for improving many areas where businesses struggle to comply. We also work with SST to reach out to non-member states, getting those states to pass provisions to reduce sales tax burdens and simplify the collection process.

We Show You the Money

What do we have to show for our hard work? A lot! 

Following the Wayfair panel, where we showed that the 200-transaction threshold burdened small businesses, several states listened. Those states are stating to drop the transaction threshold from economic nexus requirements. Louisiana is a recent example of a state that dropped the transaction threshold

TICs are meant to make it easier for merchants to tax or exempt products, but TICs can change frequently. Nebraska recently certified TaxCloud’s TICs, so you can rest easy that you’re correctly taxing sales to customers in that state. The change also provides liability relief to our merchants and TaxCloud in future audits.

Thanks to our efforts, several non-SST member states have taken steps to simplify sales tax filing. Pennsylvania has a CSP program and Connecticut, Illinois, and Missouri passed laws that allow a CSP to assist remote sellers.

You’ve got a growing online business to worry about. You don’t need to worry about sales tax, too. TaxCloud has you covered and is working hard to make sales tax regulations work for you. Get started with our software today.

 

Your Guide to Remote Seller Sales Tax by State

In the past, businesses typically needed a physical presence in a state before collecting and paying sales tax. Now, many states require companies with an economic nexus also to collect and pay sales tax. Companies with economic nexus are typically remote sellers. The what, where, and how of remote seller sales tax varies by state.

Not sure which states expect you to pay tax? That’s why we created this guide to remote seller sales tax by state.

What’s a Remote Seller?

Before we jump into each state’s rules for remote sales, we need to define what a remote seller is. 

Remote sellers are businesses that don’t have a physical presence in a state (like an office or warehouse) but deliver services or products to customers in that state. 

The exact definition of what a remote seller is varies by state. In Texas, for example, your business is considered a remote seller if you sell products or services. To qualify as a remote seller in Michigan, your business must sell tangible property

Before the Supreme Court’s South Dakota vs. Wayfair decision, remote sellers typically didn’t need to worry about paying sales tax in states where they had no physical presence. Post-South Dakota vs. Wayfair, remote sellers can have economic nexus, meaning they may have a tax obligation.  

Rules for Remote Seller Sales Tax by State: Sales vs. Transactions

Of course, states have different rules for remote sellers and sales tax. That would make things too easy. 

Instead, each state has its own threshold rules for determining whether your company has economic nexus. Economic nexus can apply when your company reaches a threshold. In some states, that threshold is a sales amount, such as $100,000 in annual sales. In others, it’s a transaction number, such as 200 transactions. 

A few states use an either/or rule, meaning your company triggers nexus when it passes $100,000 in sales or has 200 transactions. Others use an and rule, meaning your company triggers nexus when it has $100,000 in sales and 200 transactions. 

And for good measure, a few states use one or the other, looking at transactions but not sales or sales volume but not transactions. 

Rules for Remote Seller Sales Tax by State: Gross vs. Retail Sales

To complicate things, states don’t always agree on the type of sales to include in the threshold. Some states use your company’s gross sales when determining the threshold, meaning all your sales in the state, including those that would be exempt from sales tax (such as sales to resellers or tax-exempt organizations). 

Some states use retail sales when determining the threshold amount, which includes any sales in the state that aren’t for resale or to wholesalers but may be for tax-exempt products (such as clothing in certain states).

Finally, a few states look at your company’s taxable sales when determining whether you meet the threshold. Taxable sales are retail sales are products where tax is due. It excludes sales of tax-exempt products. 

How to Keep up With Remote Seller Sales Tax by State

Keeping track of transactions vs. sales and gross vs. retail sales gets complicated. To help you out, we created state guides and a handy threshold map that illustrates the transaction threshold requirements in each state. 

To simplify things further, our sales tax software can do the heavy lifting for you. It calculates your sales tax obligations and collects the tax for each sale. We can also help you streamline your sales tax filing and payments. 

Don’t get lost in all the details of remote seller tax rules. Sign up for a TaxCloud account and let us do the hard work for you.

Do I Need to Collect Sales Tax in Every State?

Here’s What You Need to Know About When and Where You Should Collect Sales Tax

Each state has its own sales tax rules and requirements, and within each state, multiple cities and municipalities have their own sales tax rules, for a total of more than 13,000 sales tax jurisdictions.

Luckily the answer to “Do I need to collect sales tax in every state or jurisdiction” is likely no. 

So when do you need to collect sales tax, and more importantly, how do you know that you need to collect sales tax? We’ll break it down for you.

Do I Need to Collect Sales Tax in Every State?

Your business doesn’t need to collect sales in tax in every state because not every state collects sales tax. Five US states are sales-tax-free:

  1. Alaska
  2. Delaware
  3. Montana 
  4. New Hampshire
  5. Oregon

 

The remaining 45 states, plus Washington, DC, collect sales tax. Of those 45 states, 38 allow cities, counties, and municipalities to collect tax, too.

How to Figure Out If You Need to Collect Sales Tax in the Other States

You can determine if you need to collect sales tax in a state based on your business’s connection to that state. Before 2018 and South Dakota v. Wayfair, your business needed to have a physical presence in a state before it had to collect sales tax.

After South Dakota v. Wayfair, businesses with an economic nexus in a state can be required to collect tax. 

Physical Presence

It can be easy enough to figure out if your business has a physical presence in a state. If your main office is in a particular state, your company has a physical presence there.

But physical presence can be more nuanced in a few states. In some cases, your business may have a physical presence if it stores inventory in a particular state, has a remote employee who lives in a particular state, or if you attend a trade show in a state. 

In those cases, your company could have a physical presence and be required to collect sales tax from customers in those states. 

Economic Nexus

South Dakota v. Wayfair kicked the door to economic nexus wide open. Now your business only needs to have a financial or transaction connection with a state to collect sales tax. 

What that connection looks like varies by state. You may need to start collecting sales tax once your company surpasses a certain sales amount, such as $100,000 or $500,000, during a 12-month period. 

Or, you may need to start collecting tax once your business has a certain number of sales, such as 200. In a few states, it’s an either/or situation, meaning you can either have $X sales or X number of sales to trigger nexus. 

No Nexus, No Tax Collection Required

There may be a few states where your business doesn’t have a physical presence and doesn’t reach the economic nexus threshold. 

You’re not required to collect sales tax in those states. Your customers may have to pay the tax themselves, though. 

Even though you’re not required to collect sales tax in states where you don’t have nexus, you can still choose to do so. Collecting the tax eases the burden on your customers in those states. Plus, if you use sales tax software, deciding to collect tax in states where you don’t have nexus is simple.

TL;DR: Do I Need to Collect Sales Tax in Every State? 

In short: No. Not all states collect sales tax and those that do require you to have a physical or economic connection, aka nexus. 

How do you figure out where you need to collect sales tax? Our sales tax state guides can help. In each guide, we break down the nexus thresholds and let you know what items are always taxed and which are tax-exempt.

TaxCloud keeps your business sales tax compliant. Our software keeps track of your nexus status and collects sales tax once triggered. 

We know sales tax is complicated, and you’ve got better things to think about. Trust us to handle your sales tax so you can focus on growing your business. Get in touch today!

Ecommerce Sales Tax Rate Changes in 2023: The Colorado Retail Delivery Fee

When the Colorado retail delivery fee was rolled out in July 2022, things got off to a rocky start.

One year later, the state passed further legislation exempting certain retailers from the fee. It’s just one of a few Colorado eCommerce sales tax rate changes in 2023. Here’s what it means for you.

Colorado Retail Delivery Fee Details

Colorado’s retail delivery fee was the first of its kind, a 27-cent fee on the delivery of tangible goods to addresses in Colorado. The purpose of the fee is to support the Centennial State’s transportation infrastructure. 

Initially, retailers had to list the fee on the invoice or receipt, collecting it from each customer. The fee applied per delivery, so no matter how many items were purchased or the size of a delivery, it was 27 cents.

Sellers pay the retail delivery fee to the state when they file and pay their sales tax. The fee is only collected with delivery orders when sale tax is collected, too. If a customer’s order contains only items that are tax-exempt, sellers don’t have to collect the retail delivery fee.

Exemptions to the Colorado Retail Delivery Fee

Starting July 1, businesses with less than $500,000 in sales the previous year no longer need to collect the fee.

The new legislation also allows sellers to pay the fee out of their own pockets rather than requiring them to pass it on to their customers or include it as a line item on invoices or receipts. 

Colorado Sales Tax Rate Changes in 2023

Colorado didn’t just tweak the requirements for the Retail Delivery Fee. It also changed the rate. Starting July 1, the fee will increase to 28 cents per delivery. 

It’s just one of a few Colorado eCommerce sales tax rate changes in 2023. State and local sales taxes get updated twice a year, on January 1 and July 1. In July of this year, several Colorado cities are updating their sales tax exemptions while Grand Junction, Colorado, is bumping its sales tax rate up to 3.39% from 3.25%. 

What Do These Sales Tax Rate Changes Mean for Your Business?

What do Colorado’s retail delivery fee and sales tax rate changes mean for your ecommerce business? If you have nexus with the state and need to collect tax, the amount you collect will change in certain areas. 

But don’t sweat those changes. TaxCloud will automatically make the adjustments, so you can be confident that you’re collecting the right tax amount on every sale. Talk to our team today to learn more.

What to Look for in Ecommerce Sales Tax Software

Your online business is growing. But with growth comes complexity, particularly regarding sales tax. Sales tax rates vary across jurisdictions, and there are thousands of jurisdictions. The right ecommerce sales tax software keeps on top of tax for you, so you can focus on business growth. Look for features that make your job as easy as possible.

User-Friendliness and Automation

You shouldn’t have to be a tech wiz to use ecommerce sales tax software. Nor should you have to be a sales tax know-it-all. Leave that job to the people behind the software and look for a platform that offers ease of use and automation. 

Your sales tax software should calculate how much tax you need to collect in each state (and if you need to collect tax in certain areas). It should collect tax for you during every applicable transaction. And, it should give you the option of filing your returns for you. 

Filing

Thousands of sales tax jurisdictions means potentially thousands of sales tax returns. You don’t have time for that. Choose a sales tax software that takes care of filing for you, submitting the right returns to each state, at the right time. 

With the right sales tax software, you can focus on your business, not on taxes.

Integrations

You may have a lot of platforms in your ecommerce tech stack. Ideally, your ecommerce sales tax software will integrate with those platforms, ensuring everyone plays along nicely and cutting down on hassle and headache.

Customer Support

In a perfect world, you’d take your sales tax software out of the (figurative) box, load it up, and go. But everyone has questions occasionally, and you want someone to be there to answer them. 

Choose an ecommerce sales tax software with tax experts (self-proclaimed ‘Tax Geeks’ in our neck of the woods) available when you need them. You want someone to walk you through any tricky spots or address any concerns that come up. Support should take the form of an online support center, chat, or customer service phone line. 

Flexible Pricing

Your sales tax software shouldn’t break the bank. The software should offer pricing based on the service level you need and your company’s size or sales volume. Flexible pricing makes it easy for your sales tax software to grow as your business grows. The software will scale up as your company expands, but the price shouldn’t skyrocket.

Pricing structures include rates based on your sales volume and on API requests. You’ll only pay for what you use. 

You may prefer an annual plan, which charges a flat monthly fee, so you can more easily budget for your software expenses. 

Audit Support

In case of a sales tax audit, who are you gonna call? If you choose the right sales tax software, your software support team. 

Audits are annoying and you don’t want to have to go through them alone. Look for an ecommerce sales tax software that guides you through the audit process, making you audit-ready and helping you respond to any audit inquiries.

Pro tip: Along with choosing sales tax software that holds your hand through the audit process, look for one that reduces the risk of getting audited in the first place. You’ll sleep better at night knowing you’re not about to get a nastygram from a tax agency.

TaxCloud is a user-friendly ecommerce sales tax software that automates sales tax calculation and collection, files sales taxes for you, and offers flexible pricing and friendly customer support. Talk to us today to learn more.