Sales tax…Are you liable?
By David A. Wolford, CPA
In June of 2018, the Supreme Court ruled on a court case that changed the way states are allowed to establish nexus from businesses selling taxable products and services in their states. What does nexus mean? Nexus is the connection your business has with the states that requires you to collect and remit sales tax from your customers.
When it comes to sales tax, nexus was established in most states by physical presence before the Supreme Court ruling in 2018. If your business had a structure or employees that worked in those particular states, then you most likely were liable for collecting and remitting sales tax. Since then, the rules have changed dramatically. Now states have set up economic nexus requirements. This means, even though your business may not have a physical location in a state in which you make sales, you may be liable for collecting and remitting sales tax if you meet certain thresholds. Each state has authority to dictate the gross receipt and/or transaction limits and thresholds that trigger economic nexus.
For example, if you are an out of state business selling to customers in Maryland, you must collect and remit sales tax if the gross revenues from the taxable products or services delivered in Maryland exceeds $100,000 or the business sells taxable products or services into the state in 200 or more separate transactions.
The myriad of laws that apply from state to state and transaction to transaction makes sales tax a scary topic for most businesses, but especially for businesses with e-commerce. Don’t worry, our team at LSWG can help! We have recently partnered with Avalara, an internationally recognized expert in sales tax knowledge and return preparation. The tools Avalara provides allow us to research your questions and find answers in the overwhelming 12,000 plus sales tax jurisdictions in the United States. Avalara also allows us to file your sales tax returns efficiently for all jurisdictions in the United States.
Please contact us if you have any sales tax questions or concerns with your company. We are here to help!
|David A. Wolford, CPA, David joined the Small Business Services Department in LSWG’s Frederick office in June of 2014 where he provides accounting services to LSWG’s owner-managed business clients. A QuickBooks® Certified ProAdvisor, he specializes in payroll and financial statement preparation and is a key contributor to LSWG’s digital client accounting service, LSWG BookSmart. You can reach David at 301.662.9200, or by email at firstname.lastname@example.org.