Sales Taxes

sales tax

Understanding sales taxes can feel overwhelming, especially if you’re not an expert. However, with some basic knowledge, these issues become manageable. Simply put, taxes require consistent care and attention.

Each state has its own tax regulations and laws. Consequently, the sales tax for a product varies from state to state. Remembering all the rates is a formidable task, if not unfeasible.

The best approach is to consult a tax professional or your local Internal Revenue Office for guidance specific to your business. Each business, no matter how similar, has unique aspects.

This guide aims to simplify the complexity of taxes. Nevertheless, it doesn’t replace the advice of a tax professional or the IRS. They remain the primary advisors for your tax management needs.

What is Sales Tax?

Sales tax is a consumption tax imposed by the government on the sale of goods and services. It’s collected by the retailer and applies to both eCommerce and physical stores. The tax percentage varies based on factors like the product, its location, and destination.

Special Taxing Districts levy additional sales taxes in certain towns, cities, or counties. These are used to finance specific community-beneficial projects.

Use Tax, another form of sales tax, applies to purchases made outside the taxing jurisdiction but used within the state. It also applies to items initially purchased tax-free but later used in a taxable manner. There are Consumer Use Tax and Retailer Use Tax.

A product will incur sales tax in the state where it’s used, stored, or consumed, even if purchased elsewhere. The Excise Tax applies to specific products.

Failing to Collect or Remit the Sales Taxes

Nearly all products attract sales tax. It’s crucial to collect these taxes for maintaining a healthy business and complying with local, state, or even international regulations if applicable.

Failing to collect sales taxes means non-compliance with these rules and regulations.

Moreover, not remitting collected sales taxes equates to breaking laws imposed by your local and state government.

Such actions can lead to hefty fines or even imprisonment. To ensure a healthy business, abide by the rules and diligently track all your sales.

What is a Nexus?

“Nexus” in Latin translates to “connection”. Hence, a nexus exists if your business has a connection with a state. How this nexus is defined varies by state.

Some states view having a physical presence as a nexus. For example:

  1. Owning a physical business location such as an office, warehouse, or store.
  2. Possessing inventory in the state, which creates a nexus even if you live elsewhere.
  3. Employing a representative like a salesperson or any other employee who represents your business in that state.
  4. Engaging in dropshipping where third parties work or ship for your business creates a nexus with that state.
  5. Using affiliates who advertise your company or products also establishes a nexus between your business and the affiliate’s state.
  6. Conducting temporary sales, like attending trade shows or sending merchandise for a limited period, may also establish a nexus according to some states.

The following list is provided by TaxJar and includes information about the Nexus requirements by state: 

How To Be In Compliance with Sales Tax?

Maintaining compliance with sales tax involves a few key steps:

  1. Register your business: First, obtain your Employer Identification Number (EIN) from the IRS. Then, visit your state’s Department of Revenue site and register your business under the Sales and Use Tax section. You can learn how to register for a sales tax permit in every state here.

  2. Collect sales tax: As a Zona Shopper, sales tax is automatically collected on every purchase made, thanks to our tax collection engines. You can find more information about origin vs. destination-based sales tax sourcing here.

  3. Report and file sales tax: You will receive a 1099-K form if you meet certain requirements. You can then use this form to file your taxes or provide it to your tax professional.

The requirements, starting in 2021, are as follows:

  • You received 200 or more payments in USD during the same calendar year.
  • You earned $20,000 or more in sales over the same calendar year.
  • You collected 200 or more transactions or $20,000 or more across all your stores if you own multiple ones.

Special State Requirements: If you live in Massachusetts or Vermont, you will receive a 1099-K if you have $600.00 or more in sales, in addition to the previous requirements.

*Sales Tax Registration Per State Information Here*

Remember, this information can change at any moment, and the best person to keep you informed is your tax professional.  

Zona Shoppers E-commerce

As an eCommerce platform, Zona Shoppers operates with third-party sellers, providing a venue for their goods and services. We manage product listings, payments, receipts, and sometimes assist in shipping.

Marketplace Facilitator legislation is a set of rules shifting sales tax collection and remittance responsibilities from the third-party seller to the marketplace facilitator, such as Zona Shoppers. Therefore, we are responsible for calculating, collecting, remitting, and refunding state sales tax for sales made by third-party vendors. This applies only to transactions where Marketplace Facilitator and/or Marketplace collection legislation is enacted.

Note, in some states, local taxes aren’t included in Marketplace Facilitator Legislation, meaning Zona Shoppers isn’t responsible for these.

Please follow this link for an overview of each state’s Marketplace Facilitator laws.

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