Multi-Channel Sales Tax Compliance

Tonight’s Topics• “General Rules” of Sales Tax• Multi-channel & Multi-state Compliance• When to Collect• How Much to Collect• Here to Help

Quick Intro• Web technology + small business +

taxes• Previous tax products:• FileLater (IRS efile)• EasyEstimatedTaxes (Treasury)

• Founder of TaxJar

“General Rules” of Sales Tax

• There are too many rules!• In-state sales = collect and remit sales

tax• Out-of-state sales = not obligated….yet• The definition of out-of-state (a.k.a

nexus) depends on the state

“General Rules” of Sales Tax

• How much to collect depends on various factors

• Filing deadlines usually tied to sales volume

• Some states have discounts for early payment

• All have penalties for late payment• Save everything in case of audit

Moving to Multi-Channel

• Selling items on more than one platform • Some platforms help you collect sales

tax• None help you file or pay• Sales tax is being collected in different

accounts

Impact on Compliance

• Combine and file a single return• Not separate returns per channel

• Most sellers manually combinetransactions in excel

• Adding Amazon = multi-state business

When to Collect

Nexus: When to Collect

• Presence in a state significant enough that you need to collect sales tax in that state

• Collect sales tax from customersand remit to the state

• No presence in a state means youdon’t have to collect

Nexus TypesHome Office Inventory

• Where you live and/or operate your business

• Live in San Jose and sell out of your house

• Collect: CA

• Inventory is in a warehouse

• Live in San Jose with inventory Pennsylvania

• Collect: CA & PA

Collecting The Right Amount

How Much Do I Collect?

• Tax rate usually = state + local + special

• Origin-based state• Tax rate = seller’s location

• Destination-based state• Tax rate = where item is shipped

• California

Sale in TexasIRVING ARCHER CITY

Rate collected: 8.25%• State: 6.25%• Irving: 1.00%• Dallas MTA: 1.00%

Destination-Based: NY

NY’s Guide to Sales Tax in New York State (page 9)

Sale in New YorkSTAMFORD BUFFALO

Rate collected: 8.75%• State: 4.00%• Erie County: 4.75%

Filing in Destination

• Huge pain!• Calculate taxable sales and sales tax

collected by jurisdiction• Gets worse if you’re multi-channel

Ohio eFile

California: We’re Special!

• Technically, neither Origin or Destination• Sales tax rate= state + district tax(es)• District tax only collected on sales in a district

in which you are “engaged in business”• (Pub 44, Page 5)

• Sellers are able to charge 2 different rates• Customers in your district• Customers outside your district• Pub 177

Same District SaleSAN DIEGO CLAIREMONT

Rate collected: 8.00%• State: 7.50%• San Diego County:

0.50%

Out-of-District SaleSANTA CLARA ALAMEDA

Rate collected: 7.50 %

Buyer responsible for local use tax

Collecting on eBay

• Able to collect only one rate• Collect at district rate for everyone• Shoppers complain if rate is too high

• Collect at state rate for everyone• Pay out-of-pocket for in-district sales • Competitive advantage?

Last Thing…

Trying to comply > knowingly not complying

TaxJar: Here to Help• Automatically pulls and organizes

sales and tax data from your accounts

• Creates local jurisdictional reports • Payment reminders• Sales tax expertise

Dashboard

Let’s Talk!

mark@taxjar.comTwitter: @taxjar

Save for Later

Multi-Channel

California

Texas

New York

Confused Yet?• How do we share AZ stories of how bad it is

but then say it’s not that bad? • Many states will actually answer the phone• Get it in writing!• Use eFile whenever possible