Is Your Business Ready for the New eCommerce Sales Tax Law?
The Verdict Is in: States Determine Collection of Sales Tax from Online Stores
This month, the Supreme Court ruled that eCommerce businesses will now have to charge sales tax if mandated by the state. This decision, in essence, overturns a 1992 ruling which stated businesses need only charge sales tax in states where they have a physical presence (in the form of stores, employees, headquarters or satellite offices, warehouses, etc).
Why Was the Previous Ruling on State Sales Tax Collection Challenged?
The ruling comes on the heels of myriad complaints from brick-and-mortar businesses who felt they were being outcompeted by online retailers: not paying sales tax, they argued, is incentive for buyers to not purchase items in-store and instead seek an online option for goods offered by businesses without a substantial physical connection to their state.
State governments were also unhappy—not being able to collect sales tax for online sales decreased tax revenue as a whole, despite high ongoing levels of consumer purchasing.
During the Supreme Court case, proponents of all state sales tax collection described the former law as out of date—those who made the original ruling could not have foreseen the emergence and fast-paced growth of the modern eCommerce industry. The opposition, on the other hand, noted that eCommerce has grown to be a critical piece of the American economy, and adjusting the rules around online sales could dampen or compromise that growth.
The proponents having won out, it’s critical over the next several weeks for businesses with an online store to consider whether their current tax processes are accurate and compliant with state tax law.
New Challenges Faced by Online Retailers
The previous sales tax loophole allowed businesses selling products online to avoid navigating the tricky waters of state tax law. Now, online businesses of all sizes are tasked with the challenge of understanding, addressing, and complying with these laws.
Sales taxes are far from one-size-fits-all across the country and are full of nuance; it’s not just the percentage of tax that varies—there are also differences in what items are considered taxable.
Some experts predict that small businesses will get hit hardest by the ruling as they may not have the resources of larger corporations to adapt to the new sales tax reality.
Applications to Help Make Managing State Sales Tax Easier for Your eCommerce Business
Any good eCommerce platform will have solutions available for all online store owners. BigCommerce is no exception.
Store owners on BigCommerce have two great options at their fingertips: Avalara and TaxJar. Both allow users to collect the right amount of sales tax on every order as well as to produce detailed reports of all their sales tax data. In other words, not only will these apps help you collect sales tax, they’ll also help streamline your administrative processes when the time comes to file taxes.
Both Avalara and TaxJar are available for online stores of all sizes and budgets—basic options on Avalara are free to all BigCommerce merchants and TaxJar has a starting monthly cost of less than twenty dollars.
Wanting to Build Your Own Online Store and Not Sure Where to Start?
Running an eCommerce business can be a rewarding and profitable venture but requires a solid understanding of laws and regulations surrounding not only the selling of goods, but also the collection and processing of user information. Our expert team at efelle creative has been building eCommerce websites for years, and as Elite Partners with BigCommerce, we have the tools and resources to help make managing your online store less of an administrative nightmare and more of a revenue accelerator. Reach out today via our online form or give us a call at 206.384.4909 and let’s start chatting about building—or upgrading—your eCommerce business.