‘Tis the Season: 3 Reasons to Register to Collect Sales Tax Immediately
- Nov 14, 2015 | Stephanie Faris
For retailers, the holiday season appears to come on all too quickly each year. No matter how thorough you are in preparing for the chaotic end-of-year traffic, there'll always be some new issue to handle during December.
When that issue is sales tax collection, you’ll discover that the process of getting on the right side of the law takes time. You'll need to collect documentation and register with local authorities. In fact, your local government may require you register to collect sales tax before you accept a dime in sales.
Whether you’re starting a new business or celebrating yet another holiday season, you should check your requirements before the rush begins. If you have everything in place before Black Friday, you can focus on making as much money as possible. Here are a few reasons your business should register well before the holiday season starts.
1. You may need to register in multiple states
Even if your business has already registered in your state, you may not be completely covered. If you sell items to customers in other states over the Internet, by phone, or by mail order, you may be required to collect and report taxes there.
In most instances, you won’t be required to pay sales tax across state lines unless you’re deemed to have nexus in those states. If you have a warehouse, office space, or an employee in a state other than your own, make sure to check its nexus laws. If you use Fulfillment By Amazon, you will need to determine whether Amazon has a fulfillment center in any of the states where you do business.
2. You may need a license to sell at seasonal events
During the Christmas season, some sellers will do temporary business in new states when they set up shop at craft fairs or flea markets. The laws vary from state to state, but many event organizers require participants to show proof of a state sales tax license. Because that license may take a while to arrive in the mail, it’s important to set the process in motion well in advance of your event.
In your home location, you probably signed up for this documentation when you registered for a business license. But away-from-home sales opportunities require you go out of your way to get all the necessary permits. Do this and you’ll avoid being shut down or denied the opportunity to sell at an event.
3. You can avoid messy cleanup later
One of the biggest reasons to get your sales tax plans in order in advance of the holiday season is that you’ll know exactly what to expect. You can set up your software to calculate sales tax and help with reporting it. If you need to pay separate rates for the various states where you have nexus, you’ll be well prepared to collect the correct amount for purchases as they apply to each area. The more preparation you can do on the front end, the less cleanup work you’ll need to do once the holidays are over.
As the holidays approach, check with your local government to figure out what you need to do to collect sales tax. If you've already got that on lock-down, ensure that nothing has changed -- have you established any new nexus or have there been changes to sales tax laws? Be as proactive as possible, and then have a great holiday sales season!