Sales Tax 101 for WooCommerce Store Owners

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SALES TAX 101 FOR STORE OWNERS with MARK FAGGIANO CEO OF MONDAY, JANUARY 11, 2016

Transcript of Sales Tax 101 for WooCommerce Store Owners

Page 1: Sales Tax 101 for WooCommerce Store Owners

SALES TAX 101 FORSTORE OWNERS

withMARK FAGGIANOCEO OFMONDAY, JANUARY 11, 2016

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TODAY’S AGENDA

• General rules of sales tax• Do you have nexus?• Collecting sales tax• Filing returns• Sales tax resources• AMA

January 11, 2016

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QUICK INTRO: MARK FAGGIANO• Passion: using tech to solve problems

for small business!

• Founder of TaxJar

• Not a CPA or tax professional• Talked to thousands of online sellers, pros, auditors, states

• Here to help you make decisions

January 11, 2016

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GENERAL RULES OF SALES TAX

January 11, 2016

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RULE #1: HEADACHES ARE COMMON

• No federal sales tax laws (yet)

• 45 states (and DC) = 46 sets of laws• Nexus• Taxability• Rates• Due dates

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RULE #2: WHAT’S TAXABLE?

• Tangible items are taxable• Common exceptions are clothing and food

• Services are mostly not taxable• Are the tides changing?

• Shipping, giftwrapping can be taxable

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RULE #3: NEXUS IS EVERYTHING

Your business has a presence or connection in a state that’s significant enough for you to be required to comply with their

sales tax law

• Got nexus = comply

• No nexus = go do something else

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RULE #4: NEXUS VS. REMOTE SALES

• Sell to a state with nexus = collect sales tax• Live in CA means collect on items shipped to CA• Your state is the best place to start compliance

• Remote sales = no sales tax….yet• Remote sales are sales to any state you don’t have nexus• Live in CA; don’t have to collect on sales to WA (unless you have

nexus)

January 11, 2016

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RULE #5: PASS-THROUGH TAX

• Pay what you collect

• Never pay out of pocket!

• Sellers are ‘collection agents’

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RULE #6: THIS CAN BE AUTOMATED

Starting is the hardest part

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WHERE DO I HAVE NEXUS?

January 11, 2016

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WHEN YOU HAVE NEXUS…

• Register for a sales tax license• Enable collection on your cart or marketplace

• Collect sales tax when you have nexus

• File a return• Pay what you owe

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COMMON NEXUS TRIGGERS

• Retail store• Employee• Salesperson• Affiliate• Trade show• Drop shipping

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DROPSHIPPING• Two sales take place

• Your vendor sells to you• You sell to your customer

• Who has nexus?

• Great time to speak with a tax professional

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DROPSHIPPING SCENARIOS• Neither vendor or seller have nexus

• No tax collected

• Vendor has nexus; seller doesn’t• Seller provides exemption cert

• Vendor doesn’t have nexus; seller does• Seller collects

• Both vendor and seller have nexus• Seller provides exemption cert & collects from customer

January 11, 2016

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MULTI-CHANNEL NEXUS

• Nexus for one channel means nexusfor your entire business

• Ex – ‘FBA nexus’ gives your Woo business nexus• Collect on all your channels for the same states

January 11, 2016

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COLLECTING SALES TAX

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GOLDEN RULE OF COLLECTION

Collect sales tax when the item sold is shipped to a state where you have nexus

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MEET SALLY STORE OWNER

• Based in Akron, OH

• Only has nexus in OH

• Complying in 1 state

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NEXUS SALE

January 11, 2016

Akron, OH Lakewood, OH

Collect sales tax

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REMOTE SALE

January 11, 2016

Akron, OH Waltham, MA

Collect sales tax

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SALLY’S BUSINESS IS GROWING!

• Uses a 3rd party fulfillment service• Stores inventory in NV

• Nexus in 2 states: OH, NV

• Complying in 2 states

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NEXUS SALE

January 11, 2016

OH or NV OH

Collect sales tax

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NEXUS SALE

January 11, 2016

OH or NV NV

Collect sales tax

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REMOTE SALE

January 11, 2016

OH or NV Stockport, IA

Collect sales tax

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CALCULATING SALES TAX

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COLLECTION LOGIC

• Buyer’s state determines tax rate (sourcing)

• Tax rate usually = sum of applicable rates• State• Local• Other (i.e., education, transportation)

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ORIGIN VS. DESTINATION SOURCING

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

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

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FILING RETURNS

January 11, 2016

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FILING TO THE STATES• Filing deadlines usually tied to sales volume

• Annual, semi-annual, quarterly, monthly• Deadlines typically fall on 15-30th of the month• The more you collect, the more often you pay

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

• File zero returns!• When you’ve collected $0 in sales tax

January 11, 2016

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PAY ON TIME = $$

Some states have discountsfor on-time payment

• Generally between 1-2%• It’s free money!

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PAY MORE IF YOU’RE LATE

All states have penalties for late payment

• Booo!• Late payment charges• Interest on what wasn’t paid

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FILING IN DESTINATION STATES

• Huge pain!

• States rely on you to divide up the money collected

• Calculate taxable sales & sales tax collected by jurisdiction

• Gets worse if you’re multi-channel

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AUDITS

Save everything in case of audit

• If you file it, you have to prove it• Exemption certs are crucial• Check taxjar.com/states

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HOW ARE YOU FEELING?

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“WHAT ARE MY OPTIONS?”

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Head-in-the-sand is not an option

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Best effort > no effort

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Don’t drain your resources trying to comply

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“HOW DO I GET STARTED?”

January 11, 2016

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START HERE• Comply in your home state

• Branch out to new states if necessary• What’s your risk tolerance?• Voluntary Disclosure if you have a history• TaxJar can help

• Register, collect, and file

• New Year is perfect time to begin

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WHO WILL KNOW?

• The decision to comply is up to you

• Risk tolerance is your guide• States are getting more desperate• eCommerce is growing• Legislation is looming

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WOOCOMMERCE & SALES TAX

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COLLECTING ON WOO• Tax collection can be enabled

• Tax table (rates) has to be manually populated• All you need for flat rate charging• Doesn’t account for rate changes

• Can view tax collected• Cannot view by state or jurisdiction

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“WHAT CAN TAXJAR DO FOR ME?”

January 11, 2016

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from calculations to reporting & filing

REGISTRATIONS & EDUCATION

SMARTCALCS REPORTING AUTOFILE

Painless sales tax compliance for online sellers,

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Thousands of happy customers, including...

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ARE YOU COLLECTING ACCURATELY?

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HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION?

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ARE YOU COLLECTING ACCURATELY?

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HOW LONG DOES IT TAKE YOU TO FILE?

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