E-commerce has taken the world by storm. In 2018, e-commerce sales reached a whopping $2.8 trillion. Naturally, this industry is a force to be reckoned with and where there is revenue, there will be taxes.

E-commerce taxes differ to that or brick and mortar businesses. Every state has its own rules and tax laws for e-commerce business.

Federal and state taxes are applicable to all businesses operating in the United States, but the question of sales tax on e-commerce businesses is still a bit of a grey area, e.g. services aren’t subject to sales tax since sales tax applied to tangible products.

Here are some things you should know about e-commerce and taxes to avoid any issues with the IRS:

Sales tax nexus

A sales tax nexus is a business connection you have within a particular state. This is one of the first steps to take when setting forth into the world of e-commerce. This step determines your sales tax requirement. Once you have a sales tax nexus, you must pay sales taxes to that state.

Sales tax permit

Whether you have a sales nexus in multiple states or just one, your business need to register for a sales tax permit. The documentation must be filed with the state’s Department of Revenue. There’s the option of filing online or in hard copy form. These permits cost a nominal amount like $20 or so.

States require the sales tax revenue to fund other sectors as part of income redistribution. Tax revenue is spent on the schooling system, healthcare, public transport, etc.

Once your business is registered with the state, the state will inform you on how frequently sales tax needs to be remitted. The higher your sales, the more frequent the tax remittances. The due dates on the majority of the states is generally the 20^th day of the following month.

Are your products even taxable?

Certain goods are exempt from sales taxes and services are eligible for sales tax, as a general rule. As an entrepreneur, you need to know if the products you’re selling are even taxable. Certain exceptions to sales tax include groceries, medication, clothing, and digital downloads (e.g. buying eBooks).

Is shipping taxed?

As an e-commerce business, you rely heavily on companies that provide delivery services so that your products can reach customers immediately. Since shipping costs are such a major part of an e-commerce business model, entrepreneurs must wonder if it’s taxable or not. If you’re not charging customers for shipping, then you don’t have to worry about taxes. Businesses that charge for shipping have tax laws that vary with each state.

If you’re looking for a tax preparation service for your e-commerce business in Boca Raton, Florida, get in touch with us. Our tax professionals have helped many e-commerce businesses. We also provide other services like payroll processing and medical billing. Visit our website for more information or call 1(954) 596-9966.