Understanding and navigating sales taxes can be a difficult and often murky part of selling your products or services online. However, there are some simple steps you can follow to begin tackling these sales tax issues, so you can get back to running and growing your business.
Getting registered in your home state
For most small business owners, the top priority with regards to sales tax management is getting registered with the state in which your business is located. Completing registration is a straightforward process you can complete online by visiting your state Department of Revenue website.
Once you have successfully registered with your home state, you will be assigned a filing frequency. This is typically yearly, monthly, quarterly, or weekly filing.
While this first step may seem like a no-brainer to many, it’s not uncommon for Avalara to speak with business owners who dragged their feet on this important obligation and are now dealing with late filing penalties and interest payments. Worse yet, failure to properly manage sales tax in your home state could lead to a sales tax audit - and you don’t want that!
Registration in other states
Getting registered to collect sales tax in your home state is necessary, and it’s possible you have other states in which to repeat this step. If your company has physical connections with others states, you may have triggered nexus with the state. Nexus results in the state having the legal authority to require your business to collect sales tax on sales of taxable goods to residents of the state.
Examples of events that commonly trigger nexus include:
- Having an office in a state
- Employing residents of a state
- Storing inventory in a state
- Traveling to and doing business in a state
You’ll want to do a thorough analysis of your business to determine the states with which you have a significant physical connection. Unsure of whether you’ve triggered nexus? Our advice is to contact a tax professional who is well versed in nexus laws.
As with your home state, upon successful registration each state will assign your business a filing frequency. It should be noted that filing frequencies and deadlines may be different for every state.
Turning on tax collection
By default, sales tax collection is turned off in Weebly. It is up to users to turn it on. Once you have determined the state in which you are required to collect sales tax (due to nexus) and you have registered with those states, you are ready to begin collecting sales tax on sales to residents of those states.
In order to update sales tax in your account, you’ll need to log into the Editor, select your store then select taxes. You can set the tax rate to be applied to the appropriate shipping locations from there.
Filing sales tax returns
Once you have sales tax collection up and running, you’ll need to file returns with the states in which you are registered. As we mentioned above, your filing frequency and filing deadlines are unlikely to be the same for every state. Take care to set reminders to prevent late filing penalties.
Remitting collected tax revenues
Filing sales tax returns is only one part of your responsibility. Additionally, states expect payment of the tax revenue you file, so be sure to prepare for this step.
There are a few options for passing sales tax revenue on to a state. Many small businesses simply send a check along with their filing forms. However, as we move to an increasingly digital world, it makes more sense to remit taxes via electronic funds transfer (EFT). It’s fast, secure, and free.
Common sales tax pitfalls to avoid
Overlooked nexus states
Nexus is a complicated topic. If there is any question whether you’ve had significant physical contact with a state, we urge you to consult a tax professional to get an educated opinion. Drawing the wrong conclusion may result in months of missed sales tax, late filing penalties, and interest payments.
Missed filing deadlines
Just because you’ve registered in a state and are collecting sales tax doesn’t mean you’re done. Failure to file returns on time may result in penalties and interest payments. Our advice is to set reminders on your phone and your computer at least a week in advance so you have time to complete your sales tax filing without feeling rushed.
Waiting too long to take sales tax seriously
For many small business owners, sales tax collection seems like a hassle reserved for larger, multi-million dollar businesses - we get it. In fact, for many small business owners, the decision to collect sales tax boils down to whether the cost of potential fines and interest payments associated with not collecting is material enough to matter. However, as your business grows, so too does the risk associated with non-compliance, so don’t wait too long to get serious about sales tax compliance.
There are still those who file sales tax returns on paper and who write checks to state tax authorities. If that is you, be sure you are using the correct filing form and that you’ve signed and dated the form and the check. Failure to do so will result in delays and potential penalties due to missed filing deadlines.
As a Weebly user, you have access to powerful tools that allow you to create a unique website and sell goods online like a pro. Sales tax collection is completely within your control (you got this!). As a business owner, you determine where and when to apply taxes. Filing sales tax returns can be managed like a pro too. Don’t waste your valuable time getting lost in Excel spreadsheets or filling out filing forms by hand. By using the power of technology to automate this aspect of your business, you create time for the important things, like building your dream business!