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Sales Tax 101 for WooCommerce Store Owners

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TaxJar
TaxJar

Tons of helpful info for WooCommerce store owners wanting to learn more about how sales tax relates to their business.

1 of 58
SALES TAX 101 FOR STORE OWNERS with MARK FAGGIANO CEOOF MONDAY, JANUARY 11, 2016
TODAY’S AGENDA • General rules of sales tax • Do you have nexus? • Collecting sales tax • Filing returns • Sales tax resources • AMA January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 2
QUICK INTRO: MARK FAGGIANO • Passion: using tech to solve problems for small business! • Founder of TaxJar • Not a CPA or tax professional • Talked to thousands of online sellers, pros, auditors, states • Here to help you make decisions January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 3
GENERAL RULES OF SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 4
RULE #1: HEADACHES ARE COMMON • No federal sales tax laws (yet) • 45 states (and DC) = 46 sets of laws • Nexus • Taxability • Rates • Due dates January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 5
RULE #2: WHAT’S TAXABLE? • Tangible items are taxable • Common exceptions are clothing and food • Services are mostly not taxable • Are the tides changing? • Shipping, giftwrapping can be taxable January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 6
RULE #3: NEXUS IS EVERYTHING Your business has a presence or connection in a state that’s significant enough for you to be required to comply with their sales tax law • Got nexus = comply • No nexus = go do something else January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 7
RULE #4: NEXUS VS. REMOTE SALES • Sell to a state with nexus = collect sales tax • Live in CA means collect on items shipped to CA • Your state is the best place to start compliance • Remote sales = no sales tax….yet • Remote sales are sales to any state you don’t have nexus • Live in CA; don’t have to collect on sales to WA (unless you have nexus) January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 8
RULE #5: PASS-THROUGH TAX • Pay what you collect • Never pay out of pocket! • Sellers are ‘collection agents’ January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 9
RULE #6: THIS CAN BE AUTOMATED Starting is the hardest part January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 10
WHERE DO I HAVE NEXUS? January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 11
WHEN YOU HAVE NEXUS… • Register for a sales tax license • Enable collection on your cart or marketplace • Collect sales tax when you have nexus • File a return • Pay what you owe January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 12
COMMON NEXUS TRIGGERS • Retail store • Employee • Salesperson • Affiliate • Trade show • Drop shipping January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 13
January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 14
DROPSHIPPING • Two sales take place • Your vendor sells to you • You sell to your customer • Who has nexus? • Great time to speak with a tax professional January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 15
DROPSHIPPING SCENARIOS • Neither vendor or seller have nexus • No tax collected • Vendor has nexus; seller doesn’t • Seller provides exemption cert • Vendor doesn’t have nexus; seller does • Seller collects • Both vendor and seller have nexus • Seller provides exemption cert & collects from customer January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 16
MULTI-CHANNEL NEXUS • Nexus for one channel means nexus for your entire business • Ex – ‘FBA nexus’ gives your Woo business nexus • Collect on all your channels for the same states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 17
COLLECTING SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 18
GOLDEN RULE OF COLLECTION Collect sales tax when the item sold is shipped to a state where you have nexus January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 19
MEET SALLY STORE OWNER • Based in Akron, OH • Only has nexus in OH • Complying in 1 state January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 20
NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 21 Akron, OH Lakewood, OH Collect sales tax
REMOTE SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 22 Akron, OH Waltham, MA Collect sales tax
SALLY’S BUSINESS IS GROWING! • Uses a 3rd party fulfillment service • Stores inventory in NV • Nexus in 2 states: OH, NV • Complying in 2 states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 23
NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 24 OH or NV OH Collect sales tax
NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 25 OH or NV NV Collect sales tax
REMOTE SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 26 OH or NV Stockport, IA Collect sales tax
CALCULATING SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 27
COLLECTION LOGIC • Buyer’s state determines tax rate (sourcing) • Tax rate usually = sum of applicable rates • State • Local • Other (i.e., education, transportation) January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 28
ORIGIN VS. DESTINATION SOURCING • Origin-based state • Tax rate = seller’s location • One rate for entire state • Destination-based state • Tax rate = where item is shipped • Variable rate January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 29
30
31
FILING RETURNS January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 32
FILING TO THE STATES • Filing deadlines usually tied to sales volume • Annual, semi-annual, quarterly, monthly • Deadlines typically fall on 15-30th of the month • The more you collect, the more often you pay • Combine and file a single return per state • Not separate returns per channel • File zero returns! • When you’ve collected $0 in sales tax January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 33
PAY ON TIME = $$ Some states have discounts for on-time payment • Generally between 1-2% • It’s free money! January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 34
PAY MORE IF YOU’RE LATE All states have penalties for late payment • Booo! • Late payment charges • Interest on what wasn’t paid January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 35
FILING IN DESTINATION STATES • Huge pain! • States rely on you to divide up the money collected • Calculate taxable sales & sales tax collected by jurisdiction • Gets worse if you’re multi-channel January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 36
January 11, 2016 37Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
5/25/2016 38
AUDITS Save everything in case of audit • If you file it, you have to prove it • Exemption certs are crucial • Check taxjar.com/states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 39
HOW ARE YOU FEELING? January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 40
January 11, 2016 41Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
“WHAT ARE MY OPTIONS?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 42
Head-in-the-sand is not an option
Best effort > no effort
Don’t drain your resources trying to comply
“HOW DO I GET STARTED?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 46
START HERE • Comply in your home state • Branch out to new states if necessary • What’s your risk tolerance? • Voluntary Disclosure if you have a history • TaxJar can help • Register, collect, and file • New Year is perfect time to begin January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 47
WHO WILL KNOW? • The decision to comply is up to you • Risk tolerance is your guide • States are getting more desperate • eCommerce is growing • Legislation is looming January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 48
WOOCOMMERCE & SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 49
COLLECTING ON WOO • Tax collection can be enabled • Tax table (rates) has to be manually populated • All you need for flat rate charging • Doesn’t account for rate changes • Can view tax collected • Cannot view by state or jurisdiction January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 50
“WHAT CAN TAXJAR DO FOR ME?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 51
from calculations to reporting & filing 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 52 REGISTRATIONS & EDUCATION SMARTCALCS REPORTING AUTOFILE Painless sales tax compliance for online sellers,
Thousands of happy customers, including... 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 53
ARE YOU COLLECTING ACCURATELY?
HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION? 5/25/2016Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 55
ARE YOU COLLECTING ACCURATELY?
HOW LONG DOES IT TAKE YOU TO FILE?
GET STARTED…FOR FREE! • taxjar.com • woothemes.com • 30-day free trial (no credit card required) • Monthly or annual subscriptions • Pricing based on transaction/calculation volume • Starts at $19/month for 1k transactions • $19.95 per return 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 58

More Related Content

Sales Tax 101 for WooCommerce Store Owners

  • 1. SALES TAX 101 FOR STORE OWNERS with MARK FAGGIANO CEOOF MONDAY, JANUARY 11, 2016
  • 2. TODAY’S AGENDA • General rules of sales tax • Do you have nexus? • Collecting sales tax • Filing returns • Sales tax resources • AMA January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 2
  • 3. QUICK INTRO: MARK FAGGIANO • Passion: using tech to solve problems for small business! • Founder of TaxJar • Not a CPA or tax professional • Talked to thousands of online sellers, pros, auditors, states • Here to help you make decisions January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 3
  • 4. GENERAL RULES OF SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 4
  • 5. RULE #1: HEADACHES ARE COMMON • No federal sales tax laws (yet) • 45 states (and DC) = 46 sets of laws • Nexus • Taxability • Rates • Due dates January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 5
  • 6. RULE #2: WHAT’S TAXABLE? • Tangible items are taxable • Common exceptions are clothing and food • Services are mostly not taxable • Are the tides changing? • Shipping, giftwrapping can be taxable January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 6
  • 7. RULE #3: NEXUS IS EVERYTHING Your business has a presence or connection in a state that’s significant enough for you to be required to comply with their sales tax law • Got nexus = comply • No nexus = go do something else January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 7
  • 8. RULE #4: NEXUS VS. REMOTE SALES • Sell to a state with nexus = collect sales tax • Live in CA means collect on items shipped to CA • Your state is the best place to start compliance • Remote sales = no sales tax….yet • Remote sales are sales to any state you don’t have nexus • Live in CA; don’t have to collect on sales to WA (unless you have nexus) January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 8
  • 9. RULE #5: PASS-THROUGH TAX • Pay what you collect • Never pay out of pocket! • Sellers are ‘collection agents’ January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 9
  • 10. RULE #6: THIS CAN BE AUTOMATED Starting is the hardest part January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 10
  • 11. WHERE DO I HAVE NEXUS? January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 11
  • 12. WHEN YOU HAVE NEXUS… • Register for a sales tax license • Enable collection on your cart or marketplace • Collect sales tax when you have nexus • File a return • Pay what you owe January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 12
  • 13. COMMON NEXUS TRIGGERS • Retail store • Employee • Salesperson • Affiliate • Trade show • Drop shipping January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 13
  • 14. January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 14
  • 15. DROPSHIPPING • Two sales take place • Your vendor sells to you • You sell to your customer • Who has nexus? • Great time to speak with a tax professional January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 15
  • 16. DROPSHIPPING SCENARIOS • Neither vendor or seller have nexus • No tax collected • Vendor has nexus; seller doesn’t • Seller provides exemption cert • Vendor doesn’t have nexus; seller does • Seller collects • Both vendor and seller have nexus • Seller provides exemption cert & collects from customer January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 16
  • 17. MULTI-CHANNEL NEXUS • Nexus for one channel means nexus for your entire business • Ex – ‘FBA nexus’ gives your Woo business nexus • Collect on all your channels for the same states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 17
  • 18. COLLECTING SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 18
  • 19. GOLDEN RULE OF COLLECTION Collect sales tax when the item sold is shipped to a state where you have nexus January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 19
  • 20. MEET SALLY STORE OWNER • Based in Akron, OH • Only has nexus in OH • Complying in 1 state January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 20
  • 21. NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 21 Akron, OH Lakewood, OH Collect sales tax
  • 22. REMOTE SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 22 Akron, OH Waltham, MA Collect sales tax
  • 23. SALLY’S BUSINESS IS GROWING! • Uses a 3rd party fulfillment service • Stores inventory in NV • Nexus in 2 states: OH, NV • Complying in 2 states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 23
  • 24. NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 24 OH or NV OH Collect sales tax
  • 25. NEXUS SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 25 OH or NV NV Collect sales tax
  • 26. REMOTE SALE January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 26 OH or NV Stockport, IA Collect sales tax
  • 27. CALCULATING SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 27
  • 28. COLLECTION LOGIC • Buyer’s state determines tax rate (sourcing) • Tax rate usually = sum of applicable rates • State • Local • Other (i.e., education, transportation) January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 28
  • 29. ORIGIN VS. DESTINATION SOURCING • Origin-based state • Tax rate = seller’s location • One rate for entire state • Destination-based state • Tax rate = where item is shipped • Variable rate January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 29
  • 30. 30
  • 31. 31
  • 32. FILING RETURNS January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 32
  • 33. FILING TO THE STATES • Filing deadlines usually tied to sales volume • Annual, semi-annual, quarterly, monthly • Deadlines typically fall on 15-30th of the month • The more you collect, the more often you pay • Combine and file a single return per state • Not separate returns per channel • File zero returns! • When you’ve collected $0 in sales tax January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 33
  • 34. PAY ON TIME = $$ Some states have discounts for on-time payment • Generally between 1-2% • It’s free money! January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 34
  • 35. PAY MORE IF YOU’RE LATE All states have penalties for late payment • Booo! • Late payment charges • Interest on what wasn’t paid January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 35
  • 36. FILING IN DESTINATION STATES • Huge pain! • States rely on you to divide up the money collected • Calculate taxable sales & sales tax collected by jurisdiction • Gets worse if you’re multi-channel January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 36
  • 37. January 11, 2016 37Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
  • 39. AUDITS Save everything in case of audit • If you file it, you have to prove it • Exemption certs are crucial • Check taxjar.com/states January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 39
  • 40. HOW ARE YOU FEELING? January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 40
  • 41. January 11, 2016 41Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
  • 42. “WHAT ARE MY OPTIONS?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 42
  • 44. Best effort > no effort
  • 45. Don’t drain your resources trying to comply
  • 46. “HOW DO I GET STARTED?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 46
  • 47. START HERE • Comply in your home state • Branch out to new states if necessary • What’s your risk tolerance? • Voluntary Disclosure if you have a history • TaxJar can help • Register, collect, and file • New Year is perfect time to begin January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 47
  • 48. WHO WILL KNOW? • The decision to comply is up to you • Risk tolerance is your guide • States are getting more desperate • eCommerce is growing • Legislation is looming January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 48
  • 49. WOOCOMMERCE & SALES TAX January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 49
  • 50. COLLECTING ON WOO • Tax collection can be enabled • Tax table (rates) has to be manually populated • All you need for flat rate charging • Doesn’t account for rate changes • Can view tax collected • Cannot view by state or jurisdiction January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 50
  • 51. “WHAT CAN TAXJAR DO FOR ME?” January 11, 2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 51
  • 52. from calculations to reporting & filing 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 52 REGISTRATIONS & EDUCATION SMARTCALCS REPORTING AUTOFILE Painless sales tax compliance for online sellers,
  • 53. Thousands of happy customers, including... 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 53
  • 54. ARE YOU COLLECTING ACCURATELY?
  • 55. HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION? 5/25/2016Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 55
  • 56. ARE YOU COLLECTING ACCURATELY?
  • 57. HOW LONG DOES IT TAKE YOU TO FILE?
  • 58. GET STARTED…FOR FREE! • taxjar.com • woothemes.com • 30-day free trial (no credit card required) • Monthly or annual subscriptions • Pricing based on transaction/calculation volume • Starts at $19/month for 1k transactions • $19.95 per return 5/25/2016Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 58