If you work in retail, you probably have a basic understanding of sales tax. It is the extra percentage that a retail store collects from customers and then sends it to local tax authorities. Online retailers could mistakenly believe that sales tax is only for businesses that have a physical presence in a particular state. However, online retailers may also have similar tax collection responsibilities.
Is Your E-Commerce Retail Jewelry Company Required to Collect Sales Tax?
If beside your e-commerce store you have a physical presence or a nexus in a state, the law requires you to collect taxes from online customers in that state. A physical presence means that there is a business facility in that state. This can include:
- Office space
A question that some online jewelry retailers have when doing their e-commerce/retail jewelry company tax planning revolves around the word "nexus." In this context, the word nexus refers to the connection a seller has with a certain area prior to being required to collect and charge sales taxes for online sales there.
States have varying definitions for what they require for a nexus to be established. Most states have laws that layout eligibility factors. It's good for a company's e-commerce/retail jury accountant to review these laws and then use them when laying out the e-commerce/retail jewelry company accounting guidelines for their business. An easy way to get a clear answer is to check with a state's tax agency.
How Selling in Multiple States Affects Your E-Commerce/Retail Jewelry Company Accounting
If your business sells products to an online company and then that online company distributes the product to buyers on your behalf, your business has connections in multiple states in addition to your own. This could impact your e-commerce/retail jewelry company tax planning.
As an example, let's say you have a warehouse in Atlanta. From your warehouse, you sell products around the country. Your e-commerce/retail jewelry company CPA would only need to focus on sales tax collected from customers in Georgia. Your nexus, or physical presence, is only in Georgia.
However, if you sold the jewelry using Amazon's Fulfillment by Amazon program, you are first shipping your jewelry to Amazon. This could mean that your e-commerce/retail jewelry accountant would have to make sure that your site collects sales tax from customers in any area that Amazon does business.
Does IRS Form 1099–K Apply to E-Commerce Retail Companies?
The IRS form 1099-K was created in 2008 and requires credit card companies and third-party processors, like PayPal or Amazon, to report transactions processed on a retailer's behalf. Most online retailers that accept credit card payments from customers will get a 1099-K, providing that they have had over 200 individual transactions, and the volume of credit card transactions was over $20,000. In certain circumstances, retailers that have a credit card sales volume of over $600 a year will receive this form.
Since most companies are still providing retailers the 1099-MISC along with the 1099-K, and since these two forms may have duplicate information, your e-commerce/retail jewelry company CPA should keep detailed sales records to prevent double taxation.
Maintaining Accurate Records
Having the right information and resources can help you keep records up-to-date. It will make communication with insurance companies accurate and timely. For this reason, we at Fusion CPA offer e-commerce/retail jewelry company CFO advisory services to small and medium-sized e-commerce companies. We are based in Atlanta, Georgia, and provide accounting, tax planning, and bookkeeping help. Our goal is to be partners you can count on for all your financial and business needs. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive