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Internet sales tax laws are changing the way that both large and small businesses collect sales tax. There has been various federal legislation trying to make its way into law over the last several years – but as of 2020 – it hasn’t happened yet.
As a small business owner, the best thing you can do is stay up-to-date with the Internet Sales Tax Laws.
Current Sales Tax Laws
Under current federal laws in the United States, sellers are required to collect and remit sales tax to states where they have nexus. Nexus is a fancy term that means that the business is registered in that state.
For example: As a business based in Florida, I am required to collect sales tax from buyers in Florida and remit it to the state of Florida. If my business also had a warehouse in Texas, I would be required to collect and remit sales tax in Florida and Texas. Similarly, if I were based in North Carolina, I would be required to collect and submit sales tax in North Carolina.
The Problem with the Current Laws
Under the current federal laws, states feel they are missing out on sales tax collection when internet purchases are made from out of state.
Current State Legislation
Since the federal government hasn’t passed a law, states have been busy creating their own laws regarding sales tax on internet purchases. It’s nearly impossible for me to keep up with all the changes in all 50 states. Instead, I scoured the internet and found this awesome chart to help you. Read it, understand it, and bookmark it.
Selling Through Etsy
Wait! Before you go, did you know that if you are selling through Etsy they are likely already collecting and remitting sales tax on your behalf? Read more at this link. A word of caution though: Some state requirements are based on the number of transactions you’ve done in the state. If you sell 20 things on Etsy in a particular state, but 200 to the same state off Etsy – Etsy might not correctly be collecting and remitting sales tax on your behalf because they have no idea about the off Etsy sales you’ve made.
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Kathy
Tuesday 23rd of March 2021
Florida does not have a state tax
Christine, Cutting for Business
Tuesday 23rd of March 2021
Hello! Correct, Florida does not have state tax. This post is about sales tax - not state income tax. These are two different things.