Interstate Sales Tax

The Facts About E-Commerce State Sales Tax

Since the boom in E-Commerce companies, interstate sales tax has changed. The problem is, sales tax varies from state to state. There are some general rules, but you should check with a certified accountant to make sure that your E-Commerce business is handling interstate sales tax accurately. Sales taxes are levied on almost all goods and very few services. It is important to speak with your accountant to know whether you are liable for sales tax in your business endeavor.

As a general rule, you are liable for sales tax in the state where you operate a business office or where you have a sales agent. This is referred to as “having a nexus” in that state. You are only liable for collecting and remitting sales taxes in a state when you have a nexus in the state and you made sales to consumers in that state. For example, if I run my home-based business out of New York, and I sell a clock through my e-commerce website to someone in California, I would not be liable for any E-Commerce state sales taxes because I have no nexus in California. However, if I sold a clock to someone in New York, then I would be responsible for collecting and remitting New York sales taxes. In this situation, it is the California consumer’s responsibility to report what is called “use” tax. An individual or business pays use tax when they purchase items from outside their home state without paying any sales tax and transports those items to their home state.

Interstate Sales Tax Agreements

Some states have even entered into agreements where in-state sellers collect sales tax from buyers in neighboring states. If you live in a state that has a reciprocal sales tax agreement with another state, you're required to collect the other state's sales tax and pay it to your state's Department of Revenue. This is an important issue to bring up with your accountant.

Make Sure Your Business is Complying with Interstate Sales Tax Laws

Tax Club accountants can help business owners clarify the different challenges that come with selling products across state lines. Remember, failing to follow proper tax law could result in your company being penalized or audited. We encourage you to contact The Tax Club's E-Commerce state sales tax experts to learn more about your interstate sales tax liabilities.