New sellers often grapple with the question: “Should I collect sales tax in every state to ensure I don’t miss the correct amount?” This dilemma can leave sellers feeling paralyzed, fearing potential tax-related repercussions.
The unequivocal answer is a resounding “No, you should not collect sales tax in every state.”
In fact, it is illegal to collect sales tax in any state unless you are duly registered to do so. Once registered, you must submit sales tax reports for each reporting period as mandated by the specific state. Collecting in every state would lead to an overwhelming administrative burden, with potentially fifty reports due each quarter, month, or year, depending on the reporting schedule. Even if you make zero sales in a state during a reporting period, you still need to submit a report once registered.
So, what’s the solution? Seeking guidance from a CPA tailored to your situation is a prudent step. States have varied rules, making it essential to understand your home state’s specifics. Investigate which types of sales are taxable, whether your state follows origination or destination principles, and other pertinent details.
Fortunately, since 2017, many states have introduced Marketplace Facilitator laws. These regulations compel large platforms like Amazon to collect and remit sales tax on behalf of sellers. This eliminates the need for individual sellers to register in every state unless advised otherwise by their CPA. This streamlined process not only benefits sellers but also eases the administrative burden on state employees.
However, if you’re selling on your website or a smaller platform exempt from Marketplace Facilitator laws, additional research into your tax obligations is warranted. For personalized advice, don’t hesitate to consult with a CPA to navigate the complexities of sales tax collection efficiently. Ensure compliance, avoid legal pitfalls, and optimize your sales tax strategy with this essential Accounting Quick Tip.