The All Powerful Sales Tax Nexus
The All Powerful Sales Tax Nexus
Customers hail from all over the state and that’s hugely why an online marketplace is so effective. However, online sellers have the at times unenviable task of dealing with the Sales Tax Nexus, a mercurial part of the business where, should a company have some sort of physical connection to a particular state, the seller is then responsible for charging their customers the right amount of sales tax.
While all states have variations of the Sales Tax Nexus — and it’s essential that sellers acquaint themselves with the rules, if applicable — it is typically defined as a “physical presence” to a state. This can mean any number of things, such as having an office or warehouse, having an employee, storing inventory, drop shipping from a third party provider, having an affiliate, and even temporarily doing business at a trade show or craft fair.
To avoid hassles with the taxing authority, and if your business sounds like it falls under any of the categories listed above, take the time to understand where your state falls within the Sales Tax Nexus parameters. The responsibility falls on you, the seller, to collect sales tax from customers within your own state.
Selling within your own state is a bit simpler — the customer is typically charged the same state and local sales tax across the board. What’s greater, if you are based in New York and do not sell within the state, the Sales Tax Nexus does not apply. Sales made in destination-based states aren’t as simple, however. In these cases, the seller must educate themselves on the respective sales tax rates.
Although many online platforms are designed to calculate the correct sales tax, it is always on the back of the seller to ensure the amount is correct. Do your research. Your tax accountant will thank you in the long run.
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