Running a successful E-commerce business is not easy. Some multiple challenges and issues keep cropping up E-commerce businesses must adherenow and then.
From concentrating on the product to ensuring great supply and logistics, the E-commerce business is always under pressure.
Add to this the problem and issue of fulfilling legal paperwork and tax compliances and you are looking at a lot of extra pressure and work.
For E-commerce businesses, the Supreme Court ruling in the Wayfair Versus State of South Dakota ruling is very important. It established that businesses that are operating in different states need to pay state taxes to continue operations.
In this article, we look at five important things E-commerce businesses need to know about sales tax nexus.
Sales Tax Nexus: What is it and why you need to pay attention?
Let us begin with some facts. According to a recent report, there are more than 619 different state tax law changes that were done in the year 2019 in the United States.
If you take the total number in operation, it amounts to 5886 state tax laws!
This figure is astounding, to say the least, and any business, be it small or big, will have a hard time fulfilling all the obligations, paperwork, and tax payments.
In June 2018, the Supreme Court in the Wayfair Versus State of South Dakota ruled in favor of Nexus Laws. The Court ruled that any business, that does not have a physical presence in a state, but does business (E-commerce), needs to pay taxes if-
- It sells and delivers products and services worth more than $100,000
- Has annual billing transactions that are more than 200
The Court left it to the discretion of the states to calculate the tax amounts. This created a lot of additional stress for E-commerce businesses.
List of 5 Things E-commerce Businesses need to know about Sales Tax Nexus
- Hiring a Professional to Do the Job-
As we have already pointed out, understanding how the law works, filing the paperwork, and submitting payments are not easy. If a business owner takes upon the responsibility to look after everything, he or she will not be able to do anything else. This is why it is best to hire professional tax consultants to help you get on top of the sales tax nexus laws.
- Nexus Laws vary in the Different States-
While the Court in the Wayfair case had stated the amount at $100000 and 200 transactions, states have been free to fix this parameter. This means that at present, the nexus laws vary from state to state. As an E-commerce business, it is important to be aware of all the different state nexus laws and do the paperwork accordingly. If not, this will invite trouble.
- Failure to Comply Invites Fines, Penalties, and more-
Small businesses should note that they need to take sales tax nexus very seriously. In the last few years, states have been very stringent in terms of imposing the laws and penalizing the defaulters. Penalties can range from additional interest payments to even license cancellation of trades. This is why it is important that E-commerce businesses adhere to them carefully.
- Create a Single Channel to Measure your PoS-
Most taxation experts recommend that E-commerce businesses need to create a single Point Of Sale (PoS) for their businesses. This will help integrate all their sales platforms into one channel and give them a clear and uncomplicated idea about where the sales are taking place. This will also help taxation experts hired by the E-commerce business when they are filing the paperwork.
- Being Aware of the Changes in Sales Tax Nexus-
With so many states having their own sales tax nexus laws in place, it comes as no surprise that these keep changing. We already pointed out that in 2019 alone, 619 changes were made to sales tax nexus laws. What this means is that E-commerce businesses need to be aware of all the changes that are happening and monitor them every month.
The Final Word
Sales Tax Nexus helps states generate taxes, which they then claim to use for the betterment of their citizens. For businesses, this contributes to being an additional area of concern that they need to fulfill to keep their operations running smoothly.