Remit Sales Tax

You will start collecting sales tax after you update your set settings in your shopping carts and marketplace’s you are selling (i.e., Amazon, eBay, Walmart….) with your sales tax permits/registration number. 
 
At this point, it’s YOUR responsibility to REMIT (or give back to the state*) the sales tax in the various states and at the various levels (state, district, county, or city) on a timely basis. 

The good news is with our remitting resource this can be an automated process (unless you are a foreign seller without a U.S. bank account, see more below). 

You’ll file (or the Remitting service will do this for you) a sales tax return for each required state and sometimes the city. However, if your business is multi-channel in a destination state (where the buyer is located,) you’ll have to tell the state how to divide up the money between the jurisdictions.

*Amazon (a marketplace facilitator) will remit the sales tax for the following states; Alabama 1-1-19, Connecticut 12-1-18, Minnesota 10-1-18, New Jersey 11-1-18, Oklahoma 7-1-18, Pennslyvania 4-1-18, and Washington 1-1-18 (with a few more states pending). That’s why you will not be able to update the tax settings for those two states. You are still required to obtain a sales tax permit and file sales tax returns. 

The Importance of Your Taxable Sales Start Date
 

Taxable sales, in any state, begins when you FIRST have stock/inventory in that state. Here is why this is very important: You may have had sales in an FBA state, but your stock/inventory doesn’t show up in that state until four months later. When your stock/inventory first was in the FBA state, is when you need to collect and remit sales taxes to that state. Not when you first had sales. You could OVERPAY sales tax if you use the wrong date. To get the exact month and year that your sales tax nexus began in each state, order a report at for $29.00 at www.WhereStock.com. It will take about 3-5 business days to receive this report. 

Alternatively, if you work with Taxify.co to remit, their system will also pull the states where you have stock/inventory, and therefore you don’t need the wherestock.com report.

Setting up your Tax Account

In order to automatically file your sales tax returns with the resources recommended below, you must have your tax account set up. A tax account is an account with the department of revenue with the state involving establishing a username and password and authenticating the account (confirming your password after you establish the account). In some states, there are more steps to set up your tax account, Colorado, happens to be the most involved. Sales Tax System has some tips here about establishing your tax account. Our $75 per state permit service includes establishing your tax account, but you may have some steps in a few states where a code is mailed to the address on file to finish setting up your tax account.  

Here are tips on establishing the proper tax settings within your Colorado state tax account by Taxify (one of our remitting partners below):

The state tax account must match what Taxify has by the 20th of the filing period. Technically the accounts should be aligned by the 12th of the month whenever a return is due (i.e. If you’re filing a Q$ return for 2018, the accounts should be aligned by January 12th. This is the date that returns must be prepared in order for Taxify to guarantee on-time filing.

The Colorado return that is produced by Taxify is going to first be based off the filing frequency that is selected, which can be set to Standard, Use Tax only, Use Tax – State Tax Only, or Economic Nexus. You have to determine which frequency applies to the liabilities they have in Colorado.

The other thing that affects the return(s) generated will be the nexus locations that are set up by you for Colorado in their Filing Info settings.

If Taxify has any issues filing a return because of setup mismatch issues, our AutoFile team and/or support will be able to assist the client to get it corrected since we can see both sides of the setup at the time of filing. 

Here are tips from our other remitting partner Taxjar and a video overview:

Non-physical locations need to be added for each jurisdiction that seller ships to in Colorado; however, the state has advised to NOT add all of the jurisdictions in the state as each of the 683 jurisdictions would need to be reported monthly.  It is acceptable to back-date new physical locations when new jurisdictions have sales.

To add non-physical locations for the state-collected jurisdictions in Colorado you ship to:

  1. Identify the jurisdictions you need to add.
  2. Log in to Revenue Online. Go to your sales tax account. Under “I Want To,” click on “Add Non-Physical Locations.”
  3. Follow the steps to add non-physical locations to your sales tax account. (Need help? Watch this by our remitting partner Taxjar video walkthrough.)
  4. Once you have completed your request, you will receive an email confirmation.

What is your Remitting Frequency, Monthly, Quarterly, or Annually? The more you file a sales tax return in each state, the more fees and time it will take. The good news is, our resources below will automate the process for you (as much as possible.) Learn more here.

Filing Sales Tax Returns

Below we have our recommended remitting services that will save you time and help you avoid costly mistakes vs filing the sales tax returns yourself. You will file your sales tax returns based on the start date you added to your sales tax application when you applied for a permit. If the start date was the previous quarter and that state requires remitting based upon a quarterly basis for your levels of sales, that means you will submit one return for that past quarter. If you were remitting on a monthly basis and your start date was three months ago you would remit three past returns, one for each month. 

Vetted and Recommended Remitting Sales Tax Resources:

Taxify.co 

We urge you to check out TAXIFY (an Amazon partner) and receive a 30-day free trial at: http://go.taxify.co/salestaxsystem. There are so many benefits when you choose TAXIFY! Here are just a few: 

  • Integrates with your home-based bookkeeping software.
  • Supports Shopify, eBay, BigCommerce, Magento, and more.
  • Automated filing in all 50 states, at both the local and state levels.
  • Your returns are always effortless, accurate, and on time.
  • Protection – Remember, filing and remitting late, or incorrect tax forms is a red flag to state auditors.
  • Simple pricing, starting at just $47/month and NO hidden fees! Their fees to file a state tax return are $27 per return, per state. Your sales volume will determine if you are filing quarterly or monthly. 

Behind on sales tax? 

What about Filing Past State Sales Tax Returns?


If you are ready to move forward and apply for sales tax permits knowing you will a certain amount of sales tax, penalties, and interest you will want to apply for sales tax permits. When you apply for sales tax permits with a start date in the past, likely you will have past sales tax returns to remit. Here is where are remitting partner comes into play. 

Taxify will Pull Your Past Sales Data from Amazon 

Taxify will pull your past transactional data, allowing you to see what would have been owed in sales tax for a certain time period. Interest and penalties will be confirmed and applied by the state, once they receive your late filing(s). 

To get an estimate of how much you may owe in penalties and interest click on our Start Here tab > Sales Tax Calculator, and use our spreadsheet to input your sales numbers from Taxify. 

You may submit your past due sales tax returns with Taxify’s automated service, and then wait for the state to assess applicable penalties and interest.  

Taxify – Flyer 

Taxify Ebook – Taxify’s Sales Tax Guide for Amazon Sellers

FAQs About Taxify’s Remitting Process 

How does Taxify Receive the Sales Tax Collected to Remit to the States?

Taxify remits sales tax to the specific state or locality, directly from your bank account on file with Taxify. We do electronic/ACH payments right from your account to the state.

Does Amazon Calculate and Collect the Individual County or City Sales Taxes?

Yes, Amazon does have its own sales tax calc-engine. If an Amazon seller sets up their account accurately, we tend to see highly accurate sales tax calculations. They will collect sales tax at the county, city, or state levels where needed if the seller has set up their account correctly. Please see their knowledge-based article on How to Setup Amazon to Collect Sales Tax. 
 

In the Past, did Taxify Remit Directly to the Cities and Counties in Arizona?

Yes, Taxify can remit sales tax to state and local city or counties separately, if it is a state like Arizona, Colorado, or Louisiana, where local returns are separate from the state returns. Most states, however, feature the local jurisdictional, city, and country level sales tax right on the state return. Taxify charges on a per return basis. For, example, if one return is needed for Colorado and another return is needed for City and County of Denver (because the client has nexus in Denver,) they would charge for each return. (You may find our pricing here.)

Does Taxify require a U.S. bank account?

Yes, so they can ACH sales tax from your account and remit to automatically file your returns online. This required a banking and routing number. If you do NOT have a U.S. bank account Taxify will still prepare your sales tax return, you should remit them yourselves (mostly online) and pay your sales tax with a foreign credit card.

Taxify will still Help Prepare Your Returns without a U.S. Bank Account

For clients who do not have a US bank account, Taxify will still be able to take the transactional data and populate it into the correct returns based on the preferences set up under the ‘Filing Info’ settings in Taxify. After that point it is the responsibility of the Taxify user to download the report and submit it to the state either electronically or via paper depending on how these are set up with the state. Normal filing generation charges would still apply.

If you don’t want to file your own sales tax returns because you don’t have a U.S. bank account.

Questions for remitting with Taxify? Call Taxify at 1-860-532-0829. Let them know you were referred by Sales Tax System. Or go to this link to register with Taxify:

http://go.taxify.co/salestaxsystem

TaxJar®

TaxJar is a popular service for new e-commerce sellers. They have some of the lowest prices for remitting sales tax return $20 each provide great support. 

They have a FREE Sales & Transactions Checker: Find Where You Have Nexus. 

Sign up for a FREE TaxJar Account at this link. Even if you work with one of our partners, to sign up for this free account (and even if you need to pay for a month or two of services, this is well worth it. In fact, you may want to keep this service simply for the checking when you have nexus (economic or otherwise) in a new state.

Once you have your TaxJar account you will connect the places where you sell – they offer a simple one-click connection to your shopping carts and marketplaces. Once connected, they’ll begin importing your sales data into TaxJar. To compare your data against tax laws, we’ll need to import your data back to 2017. Wait until your data has been imported. (They’ll need all of your sales data. Otherwise, your check will not be 100% accurate). 

Even if you are working with another remitting company or e-commerce accounting firm, we recommend Taxjar and their service at determining where you have nexus with their tracker.  

SOVOS

Sovos was built to give businesses what they need to stay ahead of increasing regulatory burdens and risks anywhere in the world. They are our go-to resource for foreign sellers looking to remit sales tax in the U.S. They have services if you do not have a U.S. bank account to remit sales tax. 

Get a sales and use tax filing solution that saves time and improves accuracy for any filing method in any jurisdiction.

Complex product tax codes, rapidly changing forms, complicated exemptions, and mixed sales channels are constantly asking more from you and your team. These requirements, coupled with the swift increase in audit scrutiny and frequency, making it harder than ever to file efficiently without the risk of costly errors.

According to the IRS:

• Businesses that have no third-party reporting, reported incorrectly 56% of the time
• Businesses with third-party reporting reported incorrectly only 1% of the time

Learn more about their use and sales tax filing services at this link.

 

How to Keep Track of Your Sales Tax Owed

One of the challenges, when you start to collect sales tax, is that money is added to your account. It is your job to know how much sales tax you have collected because you must remit or give back, the sales tax the following month or quarter. You don’t want to be caught without the cash flow to pay the sales tax when it is due. Amazon does not tell you specifically how much was sales tax vs your overall income from sales. Sales tax collected is the seller’s responsibility to manage.

Here is what Scott Scharf, with CatchingClouds.net (an eCommerce accounting firm) recommends for tracking the sales tax liability, and funds collected.

“Post all sales tax collected into a single liability account on the balance sheet.”  

You can do this manually, by downloading the sales tax report from seller central. We recommend using Xero.com for the accounting www.a2xaccounting.com, which will automatically post the sales tax to the right account, and a tool like Taxify to file the sales tax returns and make payments. I do not recommend doing it manually and recording each state payment individually.

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