sales tax 101 for woocommerce store owners
TRANSCRIPT
SALES TAX 101 FORSTORE OWNERS
withMARK FAGGIANOCEO OFMONDAY, JANUARY 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 2
TODAY’S AGENDA
• General rules of sales tax• Do you have nexus?• Collecting sales tax• Filing returns• Sales tax resources• AMA
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 3
QUICK INTRO: MARK FAGGIANO• Passion: using tech to solve problems
for small business!
• Founder of TaxJar
• Not a CPA or tax professional• Talked to thousands of online sellers, pros, auditors, states
• Here to help you make decisions
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 4
GENERAL RULES OF SALES TAX
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 5
RULE #1: HEADACHES ARE COMMON
• No federal sales tax laws (yet)
• 45 states (and DC) = 46 sets of laws• Nexus• Taxability• Rates• Due dates
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 6
RULE #2: WHAT’S TAXABLE?
• Tangible items are taxable• Common exceptions are clothing and food
• Services are mostly not taxable• Are the tides changing?
• Shipping, giftwrapping can be taxable
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 7
RULE #3: NEXUS IS EVERYTHING
Your business has a presence or connection in a state that’s significant enough for you to be required to comply with their
sales tax law
• Got nexus = comply
• No nexus = go do something else
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 8
RULE #4: NEXUS VS. REMOTE SALES
• Sell to a state with nexus = collect sales tax• Live in CA means collect on items shipped to CA• Your state is the best place to start compliance
• Remote sales = no sales tax….yet• Remote sales are sales to any state you don’t have nexus• Live in CA; don’t have to collect on sales to WA (unless you have
nexus)
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 9
RULE #5: PASS-THROUGH TAX
• Pay what you collect
• Never pay out of pocket!
• Sellers are ‘collection agents’
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 10
RULE #6: THIS CAN BE AUTOMATED
Starting is the hardest part
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 11
WHERE DO I HAVE NEXUS?
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 12
WHEN YOU HAVE NEXUS…
• Register for a sales tax license• Enable collection on your cart or marketplace
• Collect sales tax when you have nexus
• File a return• Pay what you owe
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 13
COMMON NEXUS TRIGGERS
• Retail store• Employee• Salesperson• Affiliate• Trade show• Drop shipping
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 14January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 15
DROPSHIPPING• Two sales take place
• Your vendor sells to you• You sell to your customer
• Who has nexus?
• Great time to speak with a tax professional
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 16
DROPSHIPPING SCENARIOS• Neither vendor or seller have nexus
• No tax collected
• Vendor has nexus; seller doesn’t• Seller provides exemption cert
• Vendor doesn’t have nexus; seller does• Seller collects
• Both vendor and seller have nexus• Seller provides exemption cert & collects from customer
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 17
MULTI-CHANNEL NEXUS
• Nexus for one channel means nexusfor your entire business
• Ex – ‘FBA nexus’ gives your Woo business nexus• Collect on all your channels for the same states
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 18
COLLECTING SALES TAX
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 19
GOLDEN RULE OF COLLECTION
Collect sales tax when the item sold is shipped to a state where you have nexus
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 20
MEET SALLY STORE OWNER
• Based in Akron, OH
• Only has nexus in OH
• Complying in 1 state
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 21
NEXUS SALE
January 11, 2016
Akron, OH Lakewood, OH
Collect sales tax
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 22
REMOTE SALE
January 11, 2016
Akron, OH Waltham, MA
Collect sales tax
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 23
SALLY’S BUSINESS IS GROWING!
• Uses a 3rd party fulfillment service• Stores inventory in NV
• Nexus in 2 states: OH, NV
• Complying in 2 states
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 24
NEXUS SALE
January 11, 2016
OH or NV OH
Collect sales tax
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 25
NEXUS SALE
January 11, 2016
OH or NV NV
Collect sales tax
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 26
REMOTE SALE
January 11, 2016
OH or NV Stockport, IA
Collect sales tax
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 27
CALCULATING SALES TAX
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 28
COLLECTION LOGIC
• Buyer’s state determines tax rate (sourcing)
• Tax rate usually = sum of applicable rates• State• Local• Other (i.e., education, transportation)
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 29
ORIGIN VS. DESTINATION SOURCING
• Origin-based state• Tax rate = seller’s location• One rate for entire state
• Destination-based state• Tax rate = where item is shipped• Variable rate
January 11, 2016
30
31
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 32
FILING RETURNS
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 33
FILING TO THE STATES• Filing deadlines usually tied to sales volume
• Annual, semi-annual, quarterly, monthly• Deadlines typically fall on 15-30th of the month• The more you collect, the more often you pay
• Combine and file a single return per state• Not separate returns per channel
• File zero returns!• When you’ve collected $0 in sales tax
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 34
PAY ON TIME = $$
Some states have discountsfor on-time payment
• Generally between 1-2%• It’s free money!
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 35
PAY MORE IF YOU’RE LATE
All states have penalties for late payment
• Booo!• Late payment charges• Interest on what wasn’t paid
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 36
FILING IN DESTINATION STATES
• Huge pain!
• States rely on you to divide up the money collected
• Calculate taxable sales & sales tax collected by jurisdiction
• Gets worse if you’re multi-channel
January 11, 2016
37January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
05/02/2023 38
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 39
AUDITS
Save everything in case of audit
• If you file it, you have to prove it• Exemption certs are crucial• Check taxjar.com/states
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 40
HOW ARE YOU FEELING?
January 11, 2016
41January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 42
“WHAT ARE MY OPTIONS?”
January 11, 2016
Head-in-the-sand is not an option
Best effort > no effort
Don’t drain your resources trying to comply
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 46
“HOW DO I GET STARTED?”
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 47
START HERE• Comply in your home state
• Branch out to new states if necessary• What’s your risk tolerance?• Voluntary Disclosure if you have a history• TaxJar can help
• Register, collect, and file
• New Year is perfect time to begin
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 48
WHO WILL KNOW?
• The decision to comply is up to you
• Risk tolerance is your guide• States are getting more desperate• eCommerce is growing• Legislation is looming
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 49
WOOCOMMERCE & SALES TAX
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 50
COLLECTING ON WOO• Tax collection can be enabled
• Tax table (rates) has to be manually populated• All you need for flat rate charging• Doesn’t account for rate changes
• Can view tax collected• Cannot view by state or jurisdiction
January 11, 2016
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 51
“WHAT CAN TAXJAR DO FOR ME?”
January 11, 2016
05/02/2023Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 52
from calculations to reporting & filing
REGISTRATIONS & EDUCATION
SMARTCALCS REPORTING AUTOFILE
Painless sales tax compliance for online sellers,
05/02/2023Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 53
Thousands of happy customers, including...
ARE YOU COLLECTING ACCURATELY?
05/02/2023Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 55
HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION?
ARE YOU COLLECTING ACCURATELY?
HOW LONG DOES IT TAKE YOU TO FILE?
05/02/2023Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 58
GET STARTED…FOR FREE!• taxjar.com
• woothemes.com
• 30-day free trial (no credit card required)
• Monthly or annual subscriptions
• Pricing based on transaction/calculation volume• Starts at $19/month for 1k transactions• $19.95 per return