Do you sell products to customers located in multiple states? Are you registered for sales tax? Do you need to register for sales tax? Are you required to collect and remit sales tax in various states? PMBA has your answers!
Whether you need to collect and remit sales tax from your customers hinges on two things: nexus and product taxability (as well as customer exemptions, but that’s a topic for another time). Nexus is the connection between a state and a business. If that business is determined to have nexus with a state, then the business likely has tax obligations to that state. Nexus is created through physical presence in a state, such as having employees, an office space, or storing inventory, and also having an economic presence with a state. In most tax jurisdictions, economic presence for nexus purposes is satisfied if a business makes 200 or more online sales into a state and/or if the annual sales amount exceeds $100,000.
Nexus can also be established through a marketplace facilitator or sales made through a marketplace platform. If your business sells through online marketplace platforms such as Amazon, eBay, Walmart, or Target, you may have nexus obligations in multiple states. While these platforms are likely already collecting sales tax in most states on your behalf, you may still need to consider your economic nexus presence as well as your physical presence if the facilitators are storing your inventory. Marketplace sales are usually included when determining whether the economic nexus threshold has been met in a state. This rule varies on a state-by-state basis (i.e., some states may include marketplace sales for nexus purposes, and others may not).
Once nexus is established, a business’s products and/or services that are being sold into a state must be evaluated to determine if the products and/or services, themselves, are taxable. It must be noted that taxability will vary between states. For example, certain articles of clothing are exempt from tax in some states like New Jersey, yet taxable in other states. While clothing sales may seem like an obvious example, some products are more abstract, such as digital services and related products.
Your business’s nexus requirements in various taxing jurisdictions and taxability of your business’s products/services shouldn’t be taken lightly! Don’t wait to figure out your tax obligations. Contact a PMBA Sales Tax professional today!
Do you sell products to customers located in multiple states? Are you registered for sales tax? Do you need to register for sales tax? Are you required to collect and remit sales tax in various states? We have your answers!