This guest post comes courtesy of our friend Jennifer at TaxJar.
The New Year is the perfect time to evaluate your business processes, figure out what did and didn’t work last year, and aspire to greater things!
One of those business processes that can be perfected if you devote a little time to it is sales tax.
Plus, it’s a good idea to give your sales tax life a checkup every year anyway, as things can change quickly without you realizing it!
Here are the steps to give your business a New Year sales tax checkup:
1. Double Check Your Nexus
Sales tax nexus is just a fancy legalese way to say “significant connection” to a state. If you have nexus in a state, then that state considers you on the hook for charging sales tax to buyers in the state. You’ll always have sales tax nexus in your home state, but you may find that certain business activities create nexus in other states, too. To help you determine whether or not your business activities give you sales tax nexus, you can find out what every state’s laws have to say about nexus here.
2. Update Your Sales Tax Permits
There are three reasons you should update your sales tax permits:
Nexus in a new state
If you do have nexus in a new state, you should register for a sales tax permit in that state before you begin collecting from customers there.
You no longer have nexus in a state
On the other hand, maybe you no longer have nexus in a state. Maybe an out-of-state employee left the company, or you stopped storing your goods in a warehouse across the state line. If this occurs, you can cancel your sales tax permits. Just contact your state’s department of revenue. Or sometimes cancelling your sales tax permit is as simple as marking “final filing” on your last filing in that state.
Your business information has changed
A final reason you should update your sales tax permit is if any of your business information has changed. Examples of this including creating a new business entity (like an LLC), adding a partner or a new owner, or changing business addresses. See more about when you should update your sales tax permit here.
3. Ensure You’re Collecting Sales Tax from the Right Customers
If you have sales tax nexus in a new state, or no longer have nexus in a state, you should also ensure that you are still collecting sales tax from your customers correctly. This means making sure that your sales tax collection is set up correctly on all of your channels.
It can be easy, especially if you sell on more than one platform, to forget to set up sales tax collection in one of your nexus states. Double check that you’re collecting sales tax from all of your customers in all of your nexus states on all of your platforms.
4. Note Your Sales Tax Filing Due Dates and Frequencies
If you have nexus in more than one state, you’ve probably already noticed that your sales tax filing due dates fall on different days of the month in different states. It’s a fact of sales tax life that different states get to set their own rules – including due dates – and many states just like to be different!
Make sure you note down your sales tax filing due dates so you don’t mess up and incur a late fee and interest penalty.
Now is also the time of year when states may change your filing frequency. Your filing frequency is generally monthly, quarterly or annually and is usually based on your sales volume in a state. If your sales volume has increased or decreased over the past year, you may receive a letter from your state’s department of revenue changing your filing frequency. Be on the lookout!
And that’s it! You’ve given your business its 2017 sales tax filing checkup.
For a whole lot more about sales tax, check out our Sales Tax 101 for Online Sellers guide or ask a question in the Sales Tax for eCommerce Sellers Facebook group!
