Today, the smart move for online sellers is to sell on multiple channels. You can reach new audiences, maximize profits and grow even faster. But with selling one multiple shopping carts (or branded sites) and marketplaces can lead to a new challenge – administrative hassles. And sales tax is one of the backend business burdens that increases exponentially as you sell on more channels.
What’s so tricky about multichannel selling and sales tax?
It all comes down to filing your sales tax return. While sales tax is never truly simple, if you only sell on one shopping cart or online marketplace then you only have one sales tax report to run. (That is, if your platform even gives you a sales tax report – which many don’t!)
When it comes time to file your sales tax return, the vast majority of states don’t just want to see a lump sum you collected from buyers in the state. They want that amount broken down by county, city, and other special taxing district. This means figuring out where your in-state shoppers were located, and often requires a map or a tax table provided by the state.
For example, this is just a small portion of the California sales tax return.
(Hint: It scrolls down and down…)
When you sell on multiple channels, you multiply this work. Filing a single sales tax return can take hours, and as your business grows, you may find youthat have more than one return to file. What’s a busy business owner to do?
How to Conquer Multichannel Sales Tax Filing
Keeping these three things top of mind will ensure you file your sales tax returns accurately and with a minimum of wasted time.
Stay on top of your nexus states – “Nexus” is just a fancy way of saying that you have a significant presence in a state and are required to collect sales tax from buyers in that state. As you expand into multichannel selling, you may also find that you have sales tax nexus in more states. Hiring, using contractors, or starting a drop shipping relationship with a supplier in another state can all create sales tax nexus. Use this post to determine the states where you might have sales tax nexus.
Collect sales tax on all channels – You also need to ensure you’re collecting sales tax on all of your shopping carts and marketplaces in every state where you have nexus. When you sell on several platforms, it can be easy to forget to set up sales tax collection or to forget to add a new state where you may have recently created nexus. TaxJar’s “Expected Sales Tax Due” report can help you determine if you’re collecting the right amount of sales tax on all of your channels. And if you need help setting up sale tax collection on a particular shopping cart, check out our platform-specific eCommerce sales tax guides.
Automate your sales tax filing – Just as technology is making multichannel selling easier it’s also solving the problems multichannel creates. These days, you can automate your sales tax reporting and filing. A good sales tax automation tool will connect with all the carts and marketplaces you sell on, slice and dice your sales tax information, and create return-ready reports for you to file with your state(s). Or you can even AutoFile your sales tax returns to take these tasks whole hassles completely off your plate.
And with that, the hassle of sales tax is eliminated. Do you want to know more about eCommerce sales tax? Check out our Sales Tax 101 for Online Sellers guide or start the conversation in the comments!