Streamline your sales advisory process for accounting and tax with airSlate SignNow

How to create outlook signature

hello online sellers in today's video i want to talk to all of you that are just starting your business and what you need to know about sales tax before we dive in if you haven't please subscribe to our channel and hit the bell sign so every time we publish a new video you will get notified [Music] here are led groups we help tons of ecommerce businesses with their accounting and with their sales tax and we really want to help you and make you feel confident to expand your business to start your business and to inventor into this exciting e-commerce world so today i'm going to tell you everything you need to know about sales tax when you're starting your business so here we go there are two types of nexus you need to pay attention to so nexus means that you have a connection with the state or a local jurisdiction that gives that state or local jurisdiction the authority to have you be their fiduciary agent to collect tax on their behalf and remit it to them if there's not enough a connection then they cannot ask you to do that for them so if you're just starting your business the first question you need to ask yourself is where do i have physical nexus so where do you have physical presence whether it's being established through people and employee remote working employees also count owners that are not really actively participating in the day-to-day business also count but subcontractors that are not engaged in the sailing of the products do not count so if you have people and employees that creates physical nexus for you the second type of physical nexus is your products if you have inventory stored in a state whether it's through fba warehouses or not or through a 3pl your inventory is your physical presence if you have any vehicles or even leased vehicles or leased properties in a state those are also considered property in those states for you so people and property create physical nexus so if you're just starting to sell you have physical presence in the states where you are living in where your employees are and where your inventory is so first step is to register for all of these states the second one is what we call economic nexus economic nexus didn't come into play until june of 2018 before june of 2018 the only way the state can ask you to collect sales tax on their behalf and remit it to them as if you have the first type of nexus mentioned which is physical nexus and if you don't have any physical nexus you don't have any obligation but since our economy has shifted so much in the last 20 30 years from going to a brick and mortar store to shopping online from shifting to buying physical goods for economy to a service oriented economy the states want to capture that kind of revenue by taxing remote sellers so the states are saying now if you sell enough products if you have enough sales into my state then that sales amount or the transaction amount or a combination of both creates a strong enough connection that you need to be collecting sales tax on customers and remit back to the state revenue agency so we call that economic nexus so if you sell your products into a state and you sell a good amount of it usually the general rule is you have 200 transactions meaning if you produced 200 invoices if you've made 200 sales into a state or if you've sold a hundred thousand dollars worth of your products or services into a state that means you pass the threshold then on your next sale after you hit the threshold you need to collect sales tax from customers in that state before you hit the threshold that first hundred thousand dollar sale or the first 200 transactions that were made into customers in that state you do not need to collect any sales tax and once you collect you don't owe any sales tax that will happen through that first 100 000 sale so sales tax for economic nexus only gets triggered after you hit the economic nexus threshold they won't look back everything's going forward and this threshold usually resets every calendar year so let's say you sold 150 transactions into a state this year so you don't pass economic nexus the next year you sell a hundred and fifty you don't need to add these two up to say accumulatively i sold 300 you look at year by year so if you sold 119 then you're good if you sell 201 then you need to register and file so when you're starting your business you don't need to really worry about economic nexus unless you sell very small value products but very high volume then that could put you in a position where you'll trigger that 200 transaction really fast but if not that then when you are first starting to sell when you're just starting your business only worry about your physical presence where you have people where you have your property that's where you need to register and start collecting sales tax on day one then i would recommend you going forward to monitor your sales volume and sales revenue into each state maybe do a quarterly review pull your sales report and categorize and summarize your sales data by state so you can look at the report and tell yourself okay this is how much i sold into state a in the past three months this is how much i sold into state b in the past three months and this is how many invoices were sent into customers in those states and to see if you pass the economic nexus threshold or not in the description i will make a link so you can download our free economic nexus threshold by state so that'll help you to decide and determine whether you've passed the threshold or not so after you look at your sales and if you pass the threshold in a state i want you to ask yourself two questions the first is are my products taxable and the second is am i selling through a marketplace facilitator because to expand on the first question if your products are not taxable even if you pass the economic nexus threshold you don't really owe the states anything because you don't need to collect tax on exempt products so ask yourself and ask the state department of revenue whether your product is taxable if it's not taxable even if you pass the threshold don't worry about it the second question is am i selling on a marketplace facilitator and if the answer is yes good news you don't have to worry about sales tax either because marketplace facilitators are supposed to collect and remit sales tax on your behalf so what is a marketplace facilitator a marketplace facilitator is think of it as a platform like amazon walmart etsy ebay they provide a platform for sellers to sell their products and they facilitate the payment process and sometimes they also help with the fulfillment so if all of your sales are happening through a marketplace facilitator even if you pass the threshold the marketplace facilitator is going to remit on your behalf so you don't need to worry about sales tax so let me just summarize that really quick after you determine that you've passed economic nexus ask yourself are my products taxable am i selling on a marketplace if my product is taxable and i pass the economic nexus threshold and i do not sell on a marketplace facilitator then it's my responsibility to register in that state and start collecting and finding sales tax but if i pass the economic nexus threshold but my products is not taxable or even my product is taxable but i sell everything on the marketplace facilitator like amazon i don't need to worry about remitting sales tax are you with me okay so these are the key words you need to ask yourself where do i have physical presence did i pass economic nexus in any of the states that i'm selling to and for the states that i do pass the economic nexus threshold are my products taxable am i selling on a marketplace facilitator and you have to pass all of these to say okay if i'm selling on my own website i pass the economic nexus threshold and my products are taxable then i need to register and collect sales tax that is a lot of information but this is seriously the question that i go through on my consulting course with clients for various sizes so don't panic if you're just starting to sell you usually don't need to register in that many states and if you do later on down the road always ask yourself are my products exempt in certain states am i selling on a marketplace facilitator so they are taking the responsibility on my behalf and remitting on my behalf and this will really help you to feel calm and confident about sales tax and know that you're not in trouble let me know in the comments if you have any questions and again thank you so much for being on our channel please make sure to download the guide for our 10 step with sales tax and how you can manage it so it doesn't burn down your business download the nexus analysis threshold list and if you still have questions feel free to schedule a consulting call with me i love talking to business owners of various sizes and help them feel at peace with sales tax or at least come up with a strategy for sales tax so they're not in panic mode or looking for informations that are just so contradicting and everywhere on the internet i'd love to be there for you and i hope you all have a good day bye