Shopify business is more than just selling your products and earning profits. In order to ensure that your business grows, legitimately, you need to keep a check on a wide range of business aspects. Shopify sales tax is one such complicated aspect that can confuse even the best businessmen. It is crucial to have a professional US Sale Tax Advisor for an online store to help you with your sales tax requirements. There are a lot of confusing things about Shopify one of which is when you should start collecting sales tax for Shopify sellers. In this post, we have answered all your doubts about Shopify sales tax calculation.
We aim to take the confusion out of tax setup and reporting and this guide will prove of great help.
Basics of Shopify sales tax:
In order to start collecting Shopify sales tax for sellers, you must know a few basic rules first. The rules determine the way you set up and report the taxes.
Obtaining a sales permit is a must
All online businesses in the US have to abide by the Economic Nexus, which is the tax legislation for businesses that do not have any physical office. There are different thresholds in different states for businesses to qualify to reach the nexus. The threshold is changed on annual basis and hence keeping abreast of the threshold is mandatory for all businesses.
If you are a Shopify business that qualifies for the threshold, you must apply for a sales tax permit. This can be done through the state’s Department of Revenue website.
Sales tax collection is not mandatory in all states
In the United States, only 45 states and DC have made it mandatory to collect sales tax under Economic Nexus. However, there are several complications to address including the different rules for tax on shipping and sales tax number renewal in different states, cities, counties, and districts. Depending upon the state you operate from, you must collect tax as applicable.
The remittance frequency is unique to every state
Tax remittance is the process of sales tax collection from the sellers and then paying it to the IRS. The tax remittance is also different in each state. As soon as you have obtained the sales tax permit, you will be obligated to pay the sales tax you collect monthly, quarterly, or annually. The payment frequency will be different based on your state and you must check it with your state department.
Types of sales tax
There are two different types of sales taxes- destination-based and origin-based. Which one of the two taxes you would charge depends on the state regulations. If you have to pay location-based taxes, the tax is based on the location of your customers. On the other hand, origin basis tax is calculated based on your location. Shopify Sale Tax Advisor state that you must get a clear understanding of what type of sales tax applies to your business.
Shopify sales tax can be a complicated matter to handle alone, partner with a reliable and experienced Sale Tax Advisor for Ecommerce Business and simplify your Shopify sales tax transactions.