How to calculate the online sales tax
After you have obtained the sales tax permits you will need to learn how to collect the correct amount of online sales taxes. First, find out where your sales are subject to tax. This is known as sourcing and it varies by state.
The United States has twelve states that use origin-based source sourcing. These include Arizona, California, Illinois and Mississippi, Missouri. New Mexico, Ohio. Pennsylvania. Tennessee. Texas. Utah, Virginia, Texas. Utah. If your online shop is located in Philadelphia and you sell a tax-exempt item to a customer in Bethlehem (Pa.), you will calculate your eCommerce sales tax by using the Philadelphia sales tax rate.
All other online-sales-tax-collecting states in the United States use destination-based sourcing. This means that if an online store in Orlando, Florida sells an item to a Tampa resident, they will have to pay the 6% Florida sales tax and the 1.5% Hillsborough County sales tax.
This blog post explains the basic calculations of sales tax, total transaction amount and sales tax percentage. This is a great place to begin.
Wix and Avalara can help you calculate eCommerce sales taxes
You may be able file your eCommerce sales tax if you have a small online shop. If your business grows or you sell products in multiple states, an automated solution may be a good option.
Good news! The Wix eCommerce platform has integrated with Avalara an automated tax software solution. This allows you to see the most current tax rates on every transaction across the U.S. as well as around the world.
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Connect your Wix online shop to Avalara
- Log in to your Wix account
- From your Wix site dashboard, click Settings
- Choose Store Tax
- Click the “Get Automated tax” button at the top right
- To add countries to which you ship, click + Add Country. Avalara automatically calculates the tax compliance rate for every geolocation that you add.
The Avalara integration can help reduce your time spent on tax-related activities by at least 50%. You can also stay ahead of your competition. Aberdeen Strategy & Research found that the most successful organizations are 3.3x likely have automated tax filing, preparation and remittance workflows. This includes simplified processes for calculating taxes across different geographies.
How to keep up-to-date with eCommerce sales tax changes
Tax laws are constantly changing.
Avalara anticipates that there will be an increase in electronic filing enforcement by online vape and tobacco sellers. Avalara also predicts that more states will use electronic invoicing and digital file to speed up the audit process and increase compliance with eCommerce sales taxes. Missouri will also be the first state to adopt economic nexus or marketplace facilitator thresholds on January 1, 2023.
A complete list of 2022 online sales tax changes can be found here.
Turn online sales tax into your superpower
It is complex and dynamic to collect and remit sales tax online. It doesn’t need to be a deficit.