by Mark Faggiano
Mark Faggiano is the CEO of TaxJar, a service built to make sales tax compliance easier for multi-channel ecommerce sellers.
One of the best ways for eCommerce businesses to grow is to expand onto multiple channels. But multiple sales channels can also mean multiple problems. There’s inventory tracking, listing, and of course, sales tax.
Why is Sales Tax Tricky for Multichannel Sellers?
There are a few reasons:
Sales tax collection – When you sell on multiple channels, you need to be sure that you are collecting the right amount of sales tax in the state (or states) where you have sales tax nexus. Some channels are more robust than others. Amazon, for example, has a very robust tax collection engine that takes complicated sales tax rules into account. But eBay only allows online sellers to collect one sales tax rate per state. (Which, if you’ve been dealing with sales tax for awhile, you’ll know rarely ever allows you to collect the right amount of sales tax.)
Sales tax reporting – Then there’s trying to figure out how much sales tax you’ve collected from buyers in the state(s) where you need to file a sales tax return. When you only sell on one channel, this can be fairly simple. You run a report through that channel’s admin panel and you can see how much you’ve collected. But when you sell on multiple channels, this means multiple reports and trying to compile the sales tax you’ve collected in multiple states.
Sales tax filing – To make matters worse, the majority of states want to see what you’ve collected not just in the state, but broken down by city, county and other special taxing district. This is tough enough when you’re working with one report, but add more reports and it gets complicated fast!
So what can you do to make multichannel sales tax just a little bit easier?
How to Conquer Sales Tax When You Sell Multichannel
Don’t worry – the joys of technology have made dealing with sales tax easier than ever. Here are a few tips:
Stay on top of your nexus states – As you sell on more channels, you may find that your business activities cause you to have sales tax nexus (and thus need to collect sales tax from buyers) in more states. As a handy guide, here’s what creates sales tax nexus in every state.
Make sure to set up sales tax collection on all channels – One of the most common sales tax mistakes we see multichannel sellers make is forgetting to set up sales tax collection on one of their channels. This little backend task can be easy to forget when you’re trying to list new items and learn the nuances of the new platform. If you think you may not be collecting the right amount of sales tax, you can check out TaxJar’s “Actual vs. Expected Sales Tax Due” report to determine where the trouble lies.
Automate your sales tax reporting and filing – Sales tax is going to get more difficult and time consuming as you expand to multiple channels. And so is the rest of your business. If your profit exceeds your time to handle backend administrative tasks, then it’s time to automate the tasks that don’t make you any money – like reporting how much sales tax you’ve collected and filing it with the state. A sales tax automation service will connect with the channels you sell on, report how much sales tax you’ve collected, and break that amount down just as the state wants to see it – by county, city and special taxing district. You can even AutoFile your sales tax returns in many states, so you never have to touch a sales tax filing again!
It’s true what they say: More channels, more problems. But staying on top of your sales tax headache can mean you sleep just a little bit better at night. For more about sales tax for online sellers, check out our Sales Tax 101 for Online Sellers guide or start the conversation over in the Sales Tax for eCommerce Sellers Facebook group!
TaxJar is a service built to make sales tax reporting and filing simple for eCommerce sellers. Try a 30-day free trial of TaxJar today and eliminate sales tax compliance headaches from your life!