For all you entrepreneurs, hobbyists, and resellers that make a living through e-retailers like Amazon or eBay, you’re probably already familiar with Sales Tax and how it affects you. But for those who aren’t familiar, I thought I’d give you a little information about how it works and what you should do if you decide to start selling anything online.
Sales Tax is a tax imposed on the retail sales price of physical and tangible items that are sold and then later remitted to the government. It consists of roughly 4-parts: State Tax Rate, County Tax Rate, City Tax Rate, and the Special Tax Rate. Virtually all the items you buy at a local store have Sales Tax that is passed onto the consumers, but the rate in question depends on the state and/or jurisdiction that you are in.
For example, a shop in Atlanta, Georgia would hold the total Sales Tax rate to be 8.9% for every taxable item sold (there are exceptions). That’s 4.0% for the State Tax Rate, 3.0% for the County Tax Rate, 1.50% for the City Tax Rate, and 0.4% for the Special Tax Rate. So, if an item was listed to be sold at $100.00 on the shelves, it’d be $108.90 at check-out.
Normally you wouldn’t have to worry about Sales Tax if you provide a Service like Bookkeeping or Massages. And you’d be largely right… except that some states include common Services in the things that you must remit Sales Tax for. For example, Georgia taxes in-state transportation of individuals, which includes Uber and Lyft, making it one of nine (at present) states to do so.
Likewise, depending on where you live, you might not normally have to worry about Sales Taxes on digital goods. Something like an eBook or digital movie, for example, could be sold without any tax applicable because it technically isn’t a physical or tangible item. You need to check your local state Department of Revenue website to determine whether or not you’re obligated to remit taxes from the sale of digital goods.
Now, with all of that in mind, there’s one more thing e-sellers should be aware of. Because you can sell and ship across state-lines with little issue, you could inadvertently wind up owing multiple states remittance for Sales Tax. In the past this wasn’t as much of a problem, since you weren’t obligated to collect tax if you didn’t have a physical presence there via the Nexus Test, but as of the last few years this has changed.
For example, even if you manage to skirt the Nexus Test, you’ll still have to collect and remit Georgia Sales Tax if you make more than $100,000 in revenue or conduct at least 200 retail sales as of Jan. 1, 2020. For people who make their living through using e-retailers it can be easy for someone to cross that 200 transactions threshold in a year without even realizing it. Most of the bigger e-retailer platforms will attempt to take this into account, such as if you sell through Amazon, but it’s important that you look into things yourself to avoid being caught off-guard—after all, you’ll be the one on the hook if you do owe remittance.
If you need a little help, don’t hesitate to Contact Us and see about hiring us to handle your bookkeeping. That’s what we at From Red To Black LLC are here for—doing what we can to help leave your books in the black.
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