You’ve learned what states you have nexus in and you know where your products/services are taxable. Now it’s time to register with the states to collect and remit sales tax. Where to begin?

Suppose you’re registered for sales tax in a jurisdiction because you have established sales tax nexus. For various reasons though, you don’t have any sales tax to remit. You may think that because you haven’t collected any sales tax, you have no return to file.

Your online business is painfully aware of tax deadlines for income, payroll, property and other local taxes. Sales and use taxes have their deadlines, too – a dizzying number to follow, potentially with bad consequences if you miss even one.

Staying on top of your sales tax obligations is crucial to maintaining compliance and avoiding costly penalties. However, navigating the complex world of sales tax filing is a lot for a business to manage without the right expertise.

Since the Wayfair decision five years ago, sales tax compliance has had to become a major priority for businesses with multistate sales.  In fact, 33% of finance professionals rank their top two concerns of managing sales tax as keeping up with their evolving nexus footprint, according to a TaxConnex blind survey conducted at the end of 2022. The survey also stated that over 52% of financial leaders remain relatively unhappy with their company’s approach to managing sales tax.

Sales tax compliance involves a highly complex set of rules and regulations. These rules change frequently in many jurisdictions, and the question of whether (and how) your company needs to collect and remit sales tax to a certain jurisdiction can be quite difficult to determine.

Sales tax is complex for businesses of all sizes. If you are a business with customers in multiple states, your scope and risk grows in accordance with the number of states and the sales tax complexities in those states. Sales tax obligations begin with whether you have nexus in a state or other locality. Nexus today largely stems from two main factors – a physical presence or economic presence. Once nexus has been established you must determine if your products/services are taxable. If you have nexus AND your products/services are taxable, then you likely need to register and comply.

In a decision that may eventually have sales tax repercussions elsewhere, a state court has decreed that an Amazon warehouse creates no physical nexus for a group of online sellers.

Consistent (i.e., “good”) service is a nice thing to have in any industry. In a field that changes as fast as sales tax, it’s a necessity.

Partnerships, just like your sales tax obligations, evolve over time. Sales tax is not a set it and forget it task, so if you’ve handed things off and aren’t sure how things are going, it may be time for a check-up with your provider.   

Complying with your sales tax obligations involves a lot of variables – your nexus, taxability of your products, type of customer you are selling to, etc. Another key factor that effects your sales tax obligations is related to exempt transactions and exemption certificates.

What’s new in May for state sales and use taxes

The exploding world of eCommerce has put a new player front and center: the marketplace facilitator.

Sales of tangible personal property (TPP) are presumed to be taxable unless specifically identified as not taxable. However, certain exemptions could apply making the sale of TPP exempt from sales tax in some situations. An exemption could be related to the type of business that is buying the TPP – a non-profit or government entity in certain states for example. But the most common type of exemption is a resale exemption and is applicable to wholesale transactions.

Given the complexity that already exists regarding sales tax, it’d be great if states were the only jurisdictions that levied them.

Once you’ve determined your requirement to collect and remit sales tax, you’ve set-up a process to charge sales tax, and you have registered with each required state, you need to consider how you will manage the return filing process.