The content provided in this article about Sales Tax For Your Ecommerce Business, is for informational purposes only and should not be construed as tax or legal advice. Tax laws are complex and ever-changing, so it’s important to consult a qualified tax professional with any questions concerning sales taxes for your ecommerce business. A licensed tax advisor can help ensure that you stay compliant with all applicable regulations and accurately file all required returns. They can also provide tailored advice on how to manage sales taxes efficiently and effectively. It’s essential to seek expert guidance when dealing with any tax compliance issues, so do not hesitate to contact a professional if you have any concerns regarding filing obligations or other relevant matters pertaining to the collection of sales taxes for an online business.

Sales tax is a necessary part of doing business in the United States, especially for ecommerce businesses. Sales tax rates vary from state to state and can be complicated to understand and manage. The key is to stay informed on the basics of sales taxation and make sure you remain compliant with your state’s regulations. This guide will provide an overview of sales taxes, including what they are, who needs to collect them, when they need to be filed, and how to take advantage of discounts offered by some states. With this information in hand, you can ensure that your business remains in compliance with its obligations while maximizing any available savings.

By understanding sales tax and taking the necessary steps to stay compliant, you can ensure that your ecommerce business remains up-to-date with state regulations and maximize any discounts or savings available. With this guide, you’ll have a better understanding of what sales taxes are, who must collect them, when they need to be filed, and how to take advantage of discounts offered by some states. With this information in hand, you can keep your business running smoothly while avoiding costly penalties for non-compliance.

Sales Tax Nexus Requirements

Sales tax nexus refers to the legal requirement for a business to collect and remit sales taxes in a given state. For ecommerce businesses, this can be determined by two factors: whether or not you have a physical presence in the state (i.e. an office, store, warehouse) and how much revenue your business generates from sales within that state. Generally, if you conduct any amount of business within a state and have at least one employee physically present in the state, then you must collect sales tax on all applicable products sold to customers located in that state. Furthermore, some states may require retailers with no physical presence in their jurisdiction but who generate significant revenue within the state to collect sales tax as well. It is important to determine if you have reached a sales tax nexus in each state to remain compliant with local regulations.

Sales tax nexus is particularly important for ecommerce businesses, as the lack of a physical presence in certain states does not absolve them from their responsibility to collect and remit sales taxes. Sales tax nexus requirements must be thoroughly understood and monitored regularly in order to remain compliant with state regulations. By understanding what activities create a taxable presence in each state, ecommerce businesses can ensure that they are collecting the correct amount of sales tax from customers in all applicable jurisdictions.

What products require me to charge sales tax?

In general, most retail goods and services are subject to sales taxes in the United States. This includes tangible items like clothing and electronics, as well as digital products such as eBooks and software subscriptions. Sales tax also applies to certain services, including installation fees, repair services, and professional services such as accounting or legal advice. Sales taxes may also apply to food sold in grocery stores and restaurants; however, the rates vary by state.

Exemptions from sales tax for your ecommerce business may apply for some types of products or services depending on the state. Generally speaking, medical supplies, educational materials, and agricultural equipment (such as farm machinery) are often not included in taxable purchases. It is important to check with your local government agencies for exact information.

Nexus Requirements by State:

(Please consult the corresponding state website for up to date information on Sales Tax For Your Ecommerce Business)

• Alabama – Alabama code section 40-23-68 details what creates sales tax nexus in Alabama.
• Arizona – Arizona’s Nexus in Arizona guide details what creates sales tax nexus in Arizona.
• Arkansas –  The Arkansas Department of Finance and Administration’s “Arkansas Rules” publication from 2008 details nexus on page 1, under “F. Doing Business As.”
• California – Read here for what creates sales tax nexus in California (amended after the South Dakota v. Wayfair decision).
• Colorado – Regulation 39- 26-102.3 from the Colorado Department of Revenue goes into what creates sales tax nexus in the state.
• Connecticut –  General Statutes of Connecticut, Title 12 Taxation, Chapter 219, section 12-407(a)(15)(A) details what constitutes sales tax nexus. (You can find it easily in this long page of text by searching the exact term “Engaged in business in the state”.
• Florida – Florida calls sellers with nexus “dealers,” and defines “dealer” in the Florida code section 212.06.
• Georgia – Georgia calls sellers with nexus “dealers,” and defines dealer in Georgia code title 48, section 48-8-2(3). Read when out-of-state sellers are required to collect sales tax in Georgia here.
• Hawaii – Hawaii doesn’t have sales tax, but does have a “general excise tax.” Most states with any kind of presence in Hawaii, including providing services, will likely be subject to the general excise tax. Hawaii defines doing business in their General Excise Tax law, chapter 237-2 (Starts on p. 4 of this link).
• Idaho – Idaho considers “retailers engaged in business” in Idaho to have sales tax nexus. Here’s how Idaho defines sales tax nexus.
• Illinois – Illinois considers “retailers” in the state to have sales tax nexus. Here’s how Illinois defines “retailers,” (search “Retailer maintaining a place of business in this State”).
• Indiana – Indiana considers “retailers” to have nexus in Indiana. Here’s how Indiana defines retailers with nexus: Indiana Code 6-2.5-3-1(c) (you may have to choose “Chapter 6: Taxation” then use the search bar within the code).
• Iowa – Find out what creates sales tax nexus in Iowa in the Iowa Sales and Use Tax Guide.
• Kansas – Kansas statute 79-3702(h)(1) defines what business activities are considered to create sales tax nexus in Kansas.
• Kentucky – Retail activities that create nexus in Kentucky are described in Kentucky statute 139.340(2).
• Louisiana – Louisiana considers entities “Engaging in business in a taxing jurisdiction” to have nexus. This definition can be found in Louisiana Code Sec. 47:301(4).
• Maine – You can find what constitutes sales tax nexus in Maine in their “Sales Tax Reference Guide.”
• Maryland – Maryland defines what is considered nexus for out-of-state vendors in their sales and use tax FAQ here.
• Massachusetts – You can find out what constitutes nexus on this page under the heading “Who is a sales/use tax vendor?”
• Michigan – Find out what Michigan has to say about sales tax nexus here. 
• Minnesota – Minnesota defines sales tax nexus in Minnesota Statute 297A.66.
• Mississippi – Find out what constitutes doing business/sales tax nexus in Mississippi in Mississippi Code Ann. 27-65-9.
• Missouri – Find out what constitutes sales tax nexus in Missouri here.
• Nebraska – Nebraska Revised Statute 77-2701.13 defines what business activities create sales tax nexus in Nebraska.
• Nevada – Nevada defines what creates sales tax nexus in the state in a Sales Tax FAQ. Interestingly, Nevada repealed their definition of “retailer maintaining a place of business” in the state in 2007 and have not replaced it. They have, however, provided guidance for out-of-state sellers in the Use Tax – Common Questions and Answers (opens in word doc!) document on their Department of Taxation Website.
• New Jersey – This New Jersey Technical Bulletin 78-R goes into detail about what activities create sales tax nexus in New Jersey (p. 2).
• New Mexico – New Mexico has a “gross receipts tax” rather than a sales tax. You can most easily find out more about who has to collect and remit gross receipts tax here.
• New York – New York defines “vendors” as having sales tax nexus. You can find the definition of “vendor” in New York Code Section 1101(B)(8).
• North Carolina – You can find North Carolina’s definition of “engaged in business” (which creates sales tax nexus) here (p. 4 under “Engaged in Business.”)
• North Dakota – In North Dakota, any “Retailer maintaining a place of business in this state” has nexus. You can find that definition here (p. 2).
• Ohio – Ohio discusses what constitutes nexus for out-of-state sellers here (Section (8) “Nexus with the State”).
• Oklahoma – You can click here to read exactly what the Oklahoma Department of Revenue (Oklahoma’s taxing authority) has to say about what constitutes sales tax nexus in Oklahoma (page 8 – “Place of Business.”)
• Pennsylvania – Pennsylvania considers sellers “having or maintaining a place of business” in the state to have nexus. Here’s what Pennsylvania code has to say about what defines “having or maintaining a place of business.”
• Rhode Island – See p.2 of this document for what constitutes “engaging in business in the state” of Rhode Island.
• South Carolina – South Carolina spells out who has sales tax nexus in the state on this page under “Who is required to file a sales and use tax return?”
• South Dakota –  Click here to see “who needs a sales tax license” in South Dakota.
• Tennessee – You can find Tennessee’s definition of sales tax nexus for out-of-state retailers on page 11 of this publication.
• Texas – You can find Texas’s definition of “engaged in business” in the Texas code Sec. 151.107.
• Utah – Read Publication 37 for what constitutes sales tax nexus in Utah.
• Vermont – Find out what creates sales tax nexus for out of state sellers in Vermont here (under subheading (9).)
• Virginia – Virginia considers “dealers” to have sales tax nexus. Find out how Virginia defines “dealer” here.
• Washington – This publication defines nexus in Washington state.
• Washington D.C. – Sellers “engaging in business in the District” have sales tax nexus in the District of Columbia..
• West Virginia – See West Virginia’s business tax publication here.
• Wisconsin – View “activities which create Wisconsin nexus” here (11.97(3).)
• Wyoming – Wyoming considers “vendors” to have sales tax nexus. You can find Wyoming’s definition of “vendor” here under “Article 1 – State Use Tax.

(ref. https://www.bigcommerce.com/blog/ecommerce-sales-tax/)

Sales Tax Collection & Filing

Once you have determined that your ecommerce business is subject to sales tax in a given state, it’s time to start collecting taxes from customers. Sales tax must be charged on any applicable products sold and the rate should reflect the location of the customer (not the seller). Sales tax should also be collected for applicable services or shipping charges. The amount of sales tax collected should then be tracked, stored, and reported in accordance with all relevant state regulations. Once all records are in order, businesses must file their sales taxes on a periodic basis – typically quarterly or annually depending on the state’s regulations. It is important to always remain up-to-date with filing deadlines to avoid costly penalties for late payments.

It is also important to understand which types of transactions are subject to sales tax for your ecommerce business, as well as any applicable exemptions or product specific rules that apply in each state. Sales tax must be collected for all applicable sales, with the exception of certain items such as food and prescription drugs that are generally exempt from taxation. Furthermore, some states offer additional exemptions for products such as clothing, books, or medical supplies. It’s important to research which products may be exempt in each state so you can accurately determine when a purchase is taxable and when it is not.

In addition to determining which products are taxable and filing returns with the appropriate agencies, ecommerce businesses should also ensure that they are properly managing their sales tax records. Sales tax records must be kept for at least four years, and all associated documents should be stored in a secure location. Sales tax records must also be available for review by state auditors, as well as any other regulatory authorities that may need to access them. By properly managing your sales tax documents and remaining compliant with applicable laws and regulations, you can ensure that your ecommerce business is always operating within the law.

Once you have determined the amount of sales tax due and have properly tracked your transactions, it is important to determine which states and jurisdictions you need to file in. Sales taxes must be reported separately to each state where a business has nexus requirements, so it’s critical to know exactly where your business needs to register in order to remain compliant with local regulations. It’s also important for ecommerce businesses to always stay current on any changes or updates that may affect their filing obligations. Every year, some states adjust their sales tax rates or introduce new exemptions that could provide additional savings for your business. By staying up-to-date with the latest legislation, you can ensure that your business is taking full advantage of all available discounts and savings.

Resale Certificates

State issued resale certificates are important for ecommerce businesses, as they can help you avoid collecting sales taxes on purchases made for business-related purposes. To obtain a valid resale certificate, businesses must register with their state’s taxing agency and provide proof of their legal business name and contact information. Once registered, the business will be issued a unique number that must be used when making purchases from other vendors or suppliers. By presenting a valid resale certificate to vendors, ecommerce businesses can ensure that they are not being charged sales taxes on any items purchased for personal use or resold in another jurisdiction. Additionally, it is important to note that some states may impose additional requirements such as quarterly filing or annual reporting in order to remain compliant.

Final Advice on Sales Tax and eCommerce Businesses

The key to properly managing sales tax for your ecommerce business is staying organized and up-to-date on the relevant laws, regulations, and filing requirements. It can be a complicated process, but with the right knowledge and resources it can be made much easier. Take time to research each state’s rules regarding nexus requirements in order to determine when you need to collect sales tax, as well as which items are subject to taxation. To simplify the process of filing returns, invest in an automated Sales Tax System that tracks transactions and prepares compliant returns quickly and accurately. Lastly, take advantage of available resale certificates in order to save money for any business-related purchases you may make throughout the year. By following these tips, you can ensure that your ecommerce business is always operating within the law and maximizing available savings.

For more complex filing needs, it may be beneficial to seek assistance from a tax professional. Sales tax professionals can help ecommerce businesses determine their nexus requirements and properly file returns in multiple states. Additionally, they can provide guidance on how to minimize exposure as well as advise on any other relevant issues regarding the collection of sales taxes for an online business. Working with a qualified tax expert ensures that all filing obligations are being met and that your ecommerce business is compliant with all applicable regulations. Having a knowledgeable advisor available to answer questions and offer advice can help make managing sales tax stress-free and worry-free for any ecommerce business owner.

It’s important to remember that while sales taxes are an essential part of running an ecommerce business, they don’t have to be complicated or overwhelming. With the right understanding of nexus requirements, filing obligations, and product-specific rules, you can easily manage your sales tax responsibilities without it becoming a burden on your business operations.

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