Whether you’re starting a new e-commerce business in 2019 or hoping to handle your e-commerce taxation better for the upcoming tax season, tax considerations are unique for online businesses. While the concept of sales tax seems simple enough, the Supreme Court ruling in South Dakota v. Wayfair Inc. added complications to e-commerce companies doing business nationally. The decision enabled states to charge sales tax to out-of-state sellers, which means you don’t need a physical presence in a state to pay sales tax.
The tax experts at SD Associates are here to help! Here are some tax considerations for your online business to prepare you for the upcoming tax season, so you can stop focusing on e-commerce taxation and more on your e-commerce business.
Know Your Sales Tax Nexus
Even though your business is 100% online, you still need to determine if you have a sales tax nexus (a business connection within a state). If you do have sales tax nexus in a state, then you must pay sales tax to that state. Not sure if you have a sales tax nexus? Here’s what to consider:
- Physical locations (i.e. offices, warehouses facilities, etc.)
- Storage units of inventory
- Personnel (employee, contractor, salesman, etc.)
- Economic nexus (sale numbers or transactions performed in a state)
Get Crackin’ on Your Sales Tax Collection
Possibly the most important tax consideration for online businesses is setting up your online shopping carts with sales tax. Although every online shopping cart has the option to add sales tax, you must first determine if the state you have nexus in is a destination or origination state. If you’re located in a destination state, the sales tax rate you charge is based on your customer’s shipping address; if you’re located in an origin-based state, the sales tax rate you charge is based on your business location.
Taxable or Not Taxable, That Is the Question
You also must determine if your products are taxable. Typically, nearly all tangible items (jewelry, electronics, shoes, etc.) are taxable. Because taxable products differ from state to state, figuring out if your products are taxable largely depends on which state your business is located in.
Make Tax Season Less Painful with these Tax Deductions
As an e-commerce business owner, there’s bound to be business expenses you incur throughout the year that are deductible. Although there are specific criteria for different tax deductions, here is a list of the most common for e-commerce businesses:
- Home office
- Internet, cell phone, and video conferencing bills
- Website domain and hosting costs
- Travel expenses (gas, flights, car rentals, etc.)
- Business insurance
- Shipping costs
- Office supplies (boxes, printing ink, paper, markers, tape, etc.)
If you’re not sure about which tax deductions you’re eligible for, confused by the concept of sales tax nexus or overwhelmed by filing your taxes in general, then SD Associates can help! With a variety of tax services, such as tax planning, strategy creation, maximizing tax deductions and finding eligible tax credits, the tax experts at SD Associates have everything you need. Contact us today so we can start helping you with your ecommerce business tax needs!