Sales Tax Primer for Small Business Saturday
- November 25, 2016 | Laura McCamy
Small Business Saturday is the charming and local antidote to the Big Box shopping frenzy of Black Friday. It’s a day when many small businesses offer special deals and incentives to bring customers into their stores, both brick and mortar and virtual.
One step in preparing your business for a big rush on Small Business Saturday is to have your financials in order. An important part of your business financials -- especially if you do some or all of your sales through the Web -- is the glorious and varied world of sales taxes.
Here are a few tips to help you sail through your sales taxes on Small Business Saturday.
Know Your States
Ecommerce sellers definitely need to collect and remit sales tax for the state and locality where their businesses are based. Set up your shopping cart to add sales tax when customers from your state order from you online.
But do you have sales tax nexus in any other states? Some of the things that may trigger nexus are affiliate relationships (there is usually a minimum dollar amount of affiliate sales before this triggers nexus), sales reps in other states, and warehouse locations (including Amazon FBA) or offices in other states. Make sure you know where you have sales tax nexus, and add sales tax to orders you will ship to those states.
Know Your Rates
Once you’re clear on where you have sales tax nexus, make sure you understand the sales tax rates you need to charge for each of those states and that your shopping cart is programmed correctly. Some states, such as New York, set sales tax rates based on the customer’s address, so you’ll need to add the appropriate amount of local tax to the polka dotted socks you send to Poughkeepsie on Small Business Saturday.
Other states, such as Pennsylvania, have origin-based sales tax, so you will probably add the same rate for all orders in those states (thank goodness). If you understand your tax liabilities ahead of time, you can charge your customers the correct amounts and avoid dipping into your profits to pay your sales taxes.
If you have nexus and owe sales taxes in multiple states, sales tax automation software that integrates with your ecommerce platform can save you from sales tax compliance headaches later on.
Special Holiday Taxes for Small Business Saturday
In the world of sales taxes, the maxim that no good deed goes unpunished often applies. Are you offering gift wrapping? That’s taxable in Nebraska. A special free gift for your customers on Small Business Saturday? You’ll have to tax that too, unless you’re in Florida. Do you add sales tax to the cost of shipping? That depends on where you ship.
The moral of the story: If you want to do something nice for your customers, make sure you understand the sales tax ramifications first. Otherwise your good deed could cost you when it comes time to file your sales tax return.
So have a fabulous Small Business Saturday!