FAQs of Sales Tax Nexus & Compliance
Does understanding the new sales tax nexus laws feel overwhelming? Do you truly understand when, where and how to collect sales tax? For eCommerce businesses, the daunting task of handling sales tax can be grueling. That’s why Freestyle added key capabilities within M.O.M. and integrated with industry-leader TaxJar, to make compliance automated and simple, streamlining your sales tax compliance efforts across all your channels.
What is sales tax nexus?
Sales tax nexus refers to the requirement for a business to collect and pay taxes on sales they make in a certain state. Each state has a slightly different definition of nexus, but generally, states consider that a “economic connection” or “physical presence” will create nexus. This means if you have a physical presence, such as an employee or warehouse, or meet certain volume or revenue thresholds, then you must collect sales tax from buyers in that state.
What is “South Dakota v. Wayfair”?
In June of 2018, the United States Supreme Court ruled that states can apply their sales tax laws to out-of-state retailers even in cases when the retailer has no physical presence in the state. The South Dakota v. Wayfair ruling paved the way for states to collect sales tax according to both economic and physical nexus. It did not define these thresholds. Instead, each state now defines their own economic thresholds.
What are the eCommerce sales tax rules?
Sales tax for eCommerce is a tough topic. We get it! And with states having different rules, it is becoming increasingly difficult to ensure that you are compliant in every state in which you have nexus. Together, TaxJar and Freestyle can help you take the headache out of sales tax collection, reporting and filing.
Do I have to charge sales tax on eCommerce sales?
If you have nexus in a state, you are required to collect, report and remit appropriate taxes to the state. Look at the following to determine where you should collect taxes:
- You have physical locations, such as: offices, warehouses, employees, contractors, drop-shippers, affiliates or another physical presence
- Your sales or number of transactions in a state exceed that state’s economic nexus threshold
- The products you’re selling are taxable
Does every state have sales tax nexus?
45 states and Washington D.C. all have sales tax. [graphic for blog; link]
How do I know if I have sales tax nexus in a state?
The short explanation is you have sales tax nexus in a state if you’ve reached the threshold for that State. The longer explanation is you need to be aware of the threshold and can review your progress toward reaching the requirements. Once you meet the thresholds in a specific state, you are responsible to collect taxes moving forward.
For more information on economic nexus thresholds by state, visit the states’ departments of revenue. TaxJar also keeps an updated list of these thresholds.
I have a bookkeeping app – do I also need a sales tax compliance app?
In short, yes. Bookkeeping apps are great, and a necessity. They systematically track both income and expenses so you’re ready to go come tax-time. But they can only do so much. The simple truth is most of the bookkeeping apps out there just aren’t robust enough to handle the nuances of state sales tax nexus and would still require a manual process for managing sales tax
With Freestyle and the TaxJar integration, calculations, reporting and filing can be automated.
I just found out I have nexus in a state. What do I need to do now?
- Register for a sales tax permit
- Charge sales tax to any customer buying from you in that state according to the proper tax categories
- Check the filing frequency and file sales tax returns in that state
Where can I find more information about individual states’ sales tax nexus requirements?
Generally, each state’s Department of Revenue is a good place to start.
How can Freestyle’s M.O.M. state sales tax nexus tools help me stay sales tax compliant?
Freestyle has launched a ground-breaking integration with industry-leader TaxJar to help businesses just like yours accurately and seamlessly collect, report and remit state sales tax according to the states you have nexus in.
TaxJar’s industry-leading technology instantly updates to comply with any changes in sales tax laws or tax rates, ensuring your business is always in compliance.
Why do I need a sales tax integration?
Manually calculating and filing sales tax for each state is complex and time-consuming. Using the TaxJar integration can save your team hours during each filing period, so you can focus on growing your business.
Let Freestyle help you with our TaxJar module that is custom-designed specifically for you, our customer.
Where can I learn more about the M.O.M. TaxJar module integration?
Learn more about Freestyle’s powerful software solution through our certified integration with TaxJar integration. See how we can make sales tax collection and reporting easy.
Can I use TaxJar with any version of M.O.M.?
The TaxJar integration works with M.O.M. versions 10 and up. However, we also offer the M.O.M Sales Tax Module that works with versions 8,9 & 10. SiteLINK customers – we also precise sales tax calculation for you, too.