Collecting & Filing Sales Tax for Your Business

“So do I need to worry about collecting & filing sales tax for my business? And if so – what percentage or amount do I need to charge?”

Hoo boy – this is actually a surprisingly complicated question

Here’s why:

𝗘𝗮𝗰𝗵 𝘀𝘁𝗮𝘁𝗲 𝗶𝘀 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁

There is no universal federal sales tax rate – sales tax is determined by each individual state, therefore the rules and rates and filing frequencies differ from state to state.

And it’s not just state taxes – there are also local taxes (like county and city) to factor in as well.

𝗔𝗹𝗹 𝗽𝗵𝘆𝘀𝗶𝗰𝗮𝗹 𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗮𝗿𝗲 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿

What if your business is located in Ohio, but you have a warehouse located in Pennsylvania? Or a salesman located in Illinois? Did you travel to Kentucky to sell your goods at a weekend convention?  That all has an effect, too.

(And don’t get me started on the confusions and complications of drop-shipping and Amazon Fulfilment)

𝗦𝗼𝗺𝗲𝘁𝗶𝗺𝗲𝘀 𝘄𝗵𝗲𝗿𝗲 𝘆𝗼𝘂 𝘀𝗵𝗶𝗽 𝘁𝗼 𝗶𝘀 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿

While some states require you to collect sales tax based on your business location, most states are “destination-based. Therefore, you need to factor in the buyer’s ship-to location.

𝗬𝗼𝘂𝗿 𝗮𝗺𝗼𝘂𝗻𝘁 𝗼𝗳 𝘀𝗮𝗹𝗲𝘀 𝗮𝗳𝗳𝗲𝗰𝘁𝘀 𝘁𝗵𝗶𝘀 𝗮𝘀 𝘄𝗲𝗹𝗹

Depending on the state, if you’re physically located in State A and selling in State B, you don’t need to collect sales tax in State B until you cross a certain sales total minimum (like $100k in sales)

So again – this simple question doesn’t have a simple answer

However, here are a couple of amazing resources to help you figure this out for you and your business: 

This article from Bench about sales tax basics:

https://bench.co/blog/tax-tips/sales-tax-basics/

This amazing state map tax tool from Taxjar:

https://www.taxjar.com/resources/sales-tax/states

This video walks you through how to set up sales tax in your Quickbooks Online account: