Editor’s Note: Week 3 of our Guest Post series on Sales Tax by Windward Tax. Some of you have submitted questions and this is their opportunity to answer some of those for you. We hope this gives you a clearer picture on a topic that is often quite cloudy.
Q How do you suggest handling if you have not signed up for most states (including home state) and have been selling for over a year already?
I would recommend getting registered as soon as possible. The longer you postpone the inevitable, the more you trouble you could be making for yourself. Remember that there is no statute of limitations on sales tax returns that have not been filed. If you owe tax in a state where you have confirmed Nexus, you can always ask for a penalty waiver when you pay the tax.
Q What if you just realized Amazon was not collecting taxes for you until now? What to do with those sales with uncollected tax? File or not file?
The states consider that tax was included in the sales price of your products. You should get registered, file returns and request a penalty waiver on the returns you should have filed. Remember that there is no deadline for the states to come to you when you have not filed a return.
If you have a reseller permit with the state does that mean you have the ability to collect sales tax as well or do you have to do something else to do that?
States use different terminology but generally yes. If you are an Amazon seller, don’t forget to enter your sales tax account numbers into the Seller Central page for Sales Tax Settings.
Q My accountant says I’m only responsible for collecting / paying taxes in my home state. Even if my inventory is around the country or I sell an item in another state. I feel conflicted hearing two different stories. Only selling $25K this year.
Most states consider that having FBA inventory in their state gives you sales tax Nexus. I would recommend verifying your status with each state where you have inventory and have an honest discussion with your accountant. Unless sales tax is a specialty, like it is for Windward Tax, it is difficult for any firm to remain fully aware of the latest developments.
Q My accountant said the same, only in my state. He said the laws are still very foggy about it and until they become clearer there is no reason to go out of your way to collect. Plus we have no control over the warehouses and where our stuff goes.
Keep in mind that sales tax is a tax that your customers are supposed to pay. If, in the future a state determines that you should have collected tax, it would be nearly impossible to go to your customers and collect the tax after the fact. That means the tax would come out of your own pocket!
Q What is the best way to find an accountant with ecommerce experience?
Ask your fellow business people who they use. Follow up with research on the firm’s website. Determine whether you are looking for someone to do Profit & Loss Statements and income tax returns or sales tax work only. Not every firm performs every service you might want but Windward Tax specializes in sales and use tax only.
Q There’s probably no hard and fast answer but at what level sales should I start worrying about collecting sales tax? I’m new but ramping up so thinking I should probably worry about this soon.
It will be simpler for you if you do start small. You need to educate yourself or find someone who will teach you so that you know at least the basics. Besides, many states will allow you to file returns either quarterly or annually. Then you can get your system in place and grow it with a focus on your products and marketing.
Q Various versions of “I’m from outside the US, how does sales tax work for me?”
No matter where you are located, the same Nexus rules apply to you. However, during the sales tax registration process, you may find that some states will require additional information such as an ITIN, US address or US bank account.
Q All I want is to comply and GLADLY want to collect sales taxes and do what I’m supposed to, but I’m totally stuck getting registered in all the nexus states (14 the last time I checked) because the process is sooooo confusing and complicated for a common everyday person such as myself who is TRYING to do this on my own.
It certainly can be frustrating even for those of us who do registrations for a living! Most states handle registrations a bit differently and they all think their way is the best way. That is the reason Windward Tax has developed a specialized group to handle registrations. Contact us for help on your state registrations.
About the Author: David Smith is a State Tax Advisor and Amazon FBA Team Lead for Windward Tax, a sales and use tax consulting firm. He has more than 30 years of experience working with the Georgia Department of Revenue on sales and use tax issues. Feel free to contact David at [email protected] or 770-696-4145.