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E-commerce retailers: comply with online sales tax requirements

Vlad Zachary Director Omni-Channel Commerce Upshot Commerce
E-commerce retailers: comply with online sales tax requirements

Automating the sales tax processes within your online store will be critical to e-commerce success. Whether you sell $200,000 worth of product in one year or in one hour, the sales tax should be a top consideration. There are over 11,000 tax jurisdictions in the US alone and many states like Texas, Florida and California have started to require out-of-state online merchants to collect sales tax.

To comply with and remit all sales taxes on local, state, and federal levels can be a nightmare—especially for a smaller business. Further complicating the problem are international sales where, instead of sales tax, businesses need to take into consideration and comply with the VAT (value-added tax).

For a peace-of-mind solution, the automation of the tax processes needs to be in the hands of a trusted provider with a proven track-record, and one that integrates easily with most of the current e-commerce platforms. 


Do

Do learn about sales tax compliance

Learn about sales tax compliance in e-commerce and the coming Marketplace Fairness Act. The pending law will require you to tax all 50 states, so self-education is very important. Ignoring this problem will not make it go away and, sooner or later, an audit can cause too much pain.

The only thing worse than taxes are late fees on taxes. So google it: there are tons of reliable information on state and federal web-sites. Tax-service providers also generally do a good job of offering white papers and other relevant information, which can be an excellent start. 

Do ask your e-commerce providers for help

The companies that helped you setup your store, your shopping cart, and your transaction processing should have some relevant information, so reach out to them. If they don’t, perhaps it is time to look around. Most self-respecting platforms out there already integrate with at least a few comprehensive tax solutions. 

Do your own tax audit

Yes, put some numbers together and see if they make sense to you. Even better if you can get your service provider to run a regular tax report for you. Once you know that your taxes are okay for a certain period, it will be that much easier to monitor for unusual numbers or other deviations from the base period.

Do change providers if it will make it easier to comply

Sometimes re-platforming your existing online store can seem and sound like a daunting task. If however you can move to a platform that will offer you more benefits, and one that includes an integration with a comprehensive, industry grade tax-solution, you might end-up with savings, in addition to the peace-of-mind.

Do seek advice from a tax accountant

Hiring a professional is among the best ways you can approach a complicated issue like online sales taxes. It would certainly be money well-spent, even if just for the peace of mind you’ll gain. Make sure the tax-accountant has verifiable prior experience with online sales taxes for national businesses. Check with your regular accountant as well. If they don’t feel competent to cover taxes, they might know someone who does. 


Don't

Do not ignore the sales tax

Your business health depends on tax compliance, and it is not worth it to risk what you have built. Internet sales taxes can no longer be the once-a-year sit-down meeting with a tax accountant.

Do not rely on your provider to do all the work

Check and double-check and then check again. Keep internet taxes on your radar and ask your provider for any of the questions that bother you. Was there a tax-holiday? How often do the rates update? Are there new rules for calculating these rates? Unless you have an iron-clad clause that keeps your provider on the hook for any unpaid taxes or fees, it is only good business to keep an eye on this.

Do not round it up

If the complexity of your business is relatively low and you have chosen to do-it-yourself, you will probably soon feel like an expert. Still, it makes sense to have an actual tax professional validate your work from time to time.

Do not forget the tax holidays

Every so often states offer these local economy boosters—the no-sales-tax weekends. Make sure your platform can support these free tax days. If it doesn’t, find a way to track them and take advantage. You don’t want to be the only one collecting sales-tax, when nobody else is.


Summary
Jumping cartoon

If there is one piece of advice you take away from this post, it should be this: It is critical to have a trusted solutions provider to help with your online sales tax automation.

Your platform needs to have a proven track record in all aspects of e-commerce—including internet sales taxes. Most online store platforms integrate well with a variety of trusted and reliable tax-solution providers. If you have doubts about yours, perhaps it is time to shop around for a new one. 


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Vlad ZacharyDirector Omni-Channel Commerce

Before joining Upshot Commerce, Vlad was the Mobile Product lead at Demandware, Omni-Channel product manager at Micros and co-founder at Pingwyn. Vlad has a Babson MBA....

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