Your Holiday Guide to Tax Compliance

Your Holiday Guide to Tax Compliance

Retailers are notoriously busy during the holiday season, which brings both shoppers and sales tax compliance headaches.

Continue reading to find out more about tax compliance and what to look for when selecting an online sales tax management software. To ensure your business is compliant with sales tax and pays tariffs, we have included a holiday readiness checklist.

What does tax compliance mean?

Tax compliance is a requirement in the retail industry. It means that you must pay a certain percentage of your earnings to the government. These rates are called a retail sales tax.

It is crucial to know the sales tax rates in your state and your locality, especially when it comes to pricing your products. The government usually collects the amount that retailers charge at the time that a customer purchases. This way, the correct amount is available when you need it.

Let’s now discuss tax compliance.

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01. Recognize the areas where you are required to collect sales tax

Sales tax was once relatively simple. Iowa sales tax would be collected at the point of purchase if you owned a shop in Iowa. Online shopping allows you to sell the same products from your Iowa store (or anywhere else) and have the ability to ship them internationally.

This is a great business opportunity, especially during the holidays. You can really leverage your global reach to increase sales. Tax complications can arise from having a national or international business presence.

States can collect taxes from businesses with a nexus to the state or a physical presence there under traditional tax laws. A state can require remote sellers to register to collect sales tax and remit it if they meet or exceed the threshold sales and/or transaction thresholds for delivery into the state in a given timeframe. Many states have a collection obligation for remote sellers who make more than $100,000 or have at least 200 transactions that are eligible for delivery to the state. Economic nexus thresholds are different for each state, as with all sales tax laws.

Are you unsure of your obligations? A CPA can help you determine which states have nexus with you and how to collect tax.

02. Reliable tax compliance software

Wix merchants can make a big impact on their bottom lines during the holidays. This is when retailers experience their highest sales season. There are so many wishes waiting to be fulfilled and shoppers eager to make the most of great sales. Although high demand is good for businesses, it can also lead to a lot of tax rate calculations that are fast-paced. The possibility of error increases if you don’t have the right software to manage your tax compliance.

You can have the peace of mind that you need during the holidays when sales are rolling in quickly and from many places. Wix Stores has partnered with Avalara, an online tax software that offers a sub-second response. Go to your Wix dashboard and click on the Store Tax area. This will allow you to set up automatic tax calculations with Avalara. Next, select the states or regions where you are required to collect sales tax. During checkout, your customers will receive the most current tax rates in real time.

03. Find the most current tax rates

Rates for tax are not set in stone. These numbers can change frequently. These adjustments may occur when the national or state government undergoes a transition and new tax policies are adopted. This can also occur when a local government declares tax holidays. Many states, for example, have established an annual tax-free holiday that falls on the last weekend of summer. Most states allow tax-free purchases for back-to school items, such as clothing and school supplies.

The good news is: The bad news? You have a business. Avalara’s tax compliance software handles these tax changes so that you can focus on increasing sales during the holiday season. The software updates automatically with the most recent sales tax rates when you add regions to be taxed. This ensures that your checkout process is smooth.

Checklist for personal holiday readiness to ensure tax compliance

The following checklist can be used as a guideline. We recommend that you speak with your CPA or lawyer regarding tax compliance matters for your business, including nexus, home rule, filing, and exemptions.

01. Nexus

Are you sure where sales tax is due? Continue to the Calculation section if yes. If not, please review the following items.

  • Verify if there is a nexus between your business activities and the state.
  • Check to see if your sales exceed the minimum threshold required for sales tax registration.
  • Register to pay sales taxes in all states where there is a nexus.
  • These states have a filing schedule. Mark your calendar.

02. Calculation

Are you connected Avalara with your online store Continue to the Filing & Exemptions section if yes. If not, please follow these steps to automate tax calculations for your Wix online shop:

  1. Log in to your Wix.com Account
  2. From your Wix site dashboard, click Settings.
  3. Choose Store Tax.
  4. Click To Get an Automated Tax at the top right
  5. To add countries to which you ship or sell, click + Add Country. Avalara automatically calculates the tax rate for each new location.

03. Filing and exemptions

Are you familiar with the filing requirements for each state in which you have nexus? Are you familiar with the exemptions available to your business and how to apply them?

  • For information about the state where your business is located, visit the Department of Revenue website. You should check for any changes in minimum sales thresholds, filing deadlines, exemption certificate rules/regulations changes, and other requirements.
  • Make sure to mark your business calendar and include the filing deadlines for each state.
  • Export ERP and shopping cart data is possible. This information may be required to file your return.
  • Tax exemptions are available. Separate transactions that include exemptions and the tax-exempt status.
  • Look at your returns from the past and determine if you have over- or underpaid.
  • Prepay to the states that require it.
  • Verify that exemption certificates are valid for all transactions.
  • For transactions with an expired or null exemption certificate, get the most recent certificate information.
  • Contact customers holding soon-to-expire exemption certificates.

source https://www.wix.com/blog/ecommerce/2019/11/your-guide-to-tax-compliance-during-the-holiday-season-with-checklist

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