How to Pay Internet Sales Tax
Determine the states in which you must collect sales tax., Learn the rates and exemptions that apply., Add sales tax to your checkout process., File sales tax returns with the state.
Step-by-Step Guide
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Step 1: Determine the states in which you must collect sales tax.
Generally, you must collect sales tax if your business has a physical location within that state.Whether you are required to collect sales tax also depends on how large your online business is.
Some states have so-called "Amazon laws" that require online merchants with sales over a certain dollar amount to collect sales tax even if they don't have a physical presence in the state.
Having a physical presence in a state doesn't just mean a store.
Warehouses and distribution centers may be considered a physical presence, as are administrative offices even if they don't sell anything.Keep in mind that five states – Alaska, Delaware, Montana, New Hampshire, and Oregon – don't have a state sales tax. -
Step 2: Learn the rates and exemptions that apply.
Once you know which state sales taxes you have to collect, you need to find out how much the tax rate is and the goods and services to which it applies.Most states have tax exemptions or different rates on certain categories of items such as food or medicine.
If one of these exemptions applies to items you sell, then you are not responsible for collecting sales tax.Keep in mind that sales taxes generally are assessed on retail sales, which means if you are selling wholesale or bulk lots online, you probably won't be on the hook for collecting sales taxes. , Many shopping cart programs available for online merchants have this feature built in – you just have to activate it.If you aren't already using a shopping-cart service to handle your online sales, you should consider doing so.
Many of these programs will automatically compute and add sales tax to purchases, saving you a lot of time and effort. , Each state has its own forms and requirements for when sales tax returns are due.States generally require retailers to pay sales taxes on either a quarterly or monthly basis.
On your tax return, you'll report your total sales, taxable sales, and exempt sales, then calculate the amount of tax due.
Each state's department of revenue has information on its website regarding how to get a sales tax permit (if necessary in that state), as well as how to file sales tax returns and when those returns are due. -
Step 3: Add sales tax to your checkout process.
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Step 4: File sales tax returns with the state.
Detailed Guide
Generally, you must collect sales tax if your business has a physical location within that state.Whether you are required to collect sales tax also depends on how large your online business is.
Some states have so-called "Amazon laws" that require online merchants with sales over a certain dollar amount to collect sales tax even if they don't have a physical presence in the state.
Having a physical presence in a state doesn't just mean a store.
Warehouses and distribution centers may be considered a physical presence, as are administrative offices even if they don't sell anything.Keep in mind that five states – Alaska, Delaware, Montana, New Hampshire, and Oregon – don't have a state sales tax.
Once you know which state sales taxes you have to collect, you need to find out how much the tax rate is and the goods and services to which it applies.Most states have tax exemptions or different rates on certain categories of items such as food or medicine.
If one of these exemptions applies to items you sell, then you are not responsible for collecting sales tax.Keep in mind that sales taxes generally are assessed on retail sales, which means if you are selling wholesale or bulk lots online, you probably won't be on the hook for collecting sales taxes. , Many shopping cart programs available for online merchants have this feature built in – you just have to activate it.If you aren't already using a shopping-cart service to handle your online sales, you should consider doing so.
Many of these programs will automatically compute and add sales tax to purchases, saving you a lot of time and effort. , Each state has its own forms and requirements for when sales tax returns are due.States generally require retailers to pay sales taxes on either a quarterly or monthly basis.
On your tax return, you'll report your total sales, taxable sales, and exempt sales, then calculate the amount of tax due.
Each state's department of revenue has information on its website regarding how to get a sales tax permit (if necessary in that state), as well as how to file sales tax returns and when those returns are due.
About the Author
Jessica Martinez
Creates helpful guides on organization to inspire and educate readers.
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