02 May When to Charge Sales Tax to Online Customers
As a merchant, it is important that you charge all applicable taxes and send them to the government throughout the year. When it comes to sales tax, how do you charge your customers correctly? How do you know if you even have to charge sales tax?
Some Merchant Accounts Calculate Taxes Automatically
In some cases, the service that you use for credit card processing may automatically calculate the sales tax and remit to the government. In other cases, the credit card processing service that you use will calculate the tax and tell you how much you are supposed to send to the government. This makes it a lot easier to keep track of the taxes that you need to withhold and send in. If you do not remit sales taxes in a timely fashion, your business could be fined a lot of money.
Most Software Programs Add Sales Taxes to the Price
If you use eCommerce software or add your own widget or plugin to your site to process payment through your merchant accounts, it will more than likely calculate the sales tax that you need to charge depending on what state that you are in. When you add the widget or plugin to your site, it can be configured ahead of time to make calculations only when sales taxes need to be charged and how much the tax rate is.
When Are You Obligated to Charge Sales Tax?
You are only obligated to pay sales tax if you have nexus in a state that charges a sales tax for the product that you are selling. Nexus means that you have some tangible association within the state. For example, you may sell digital downloads from your computer in California or have a factory in the state of New York. This means that you play by the sales tax rules of that state. If you are not obligated to pay sales tax on an item but your customer is, it is on the customer to send the tax money to the government.
Whether or not to charge sales tax is an issue that you should ask an accountant or tax attorney about before selling a product. Remember, you do not have to pay the sales tax yourself. Instead, the customer will pay that on top of the price being paid for a product or service.