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Jonathan Giddens, Regional Sales Manager at Avalara, conducted the, ”Sales Tax in the Ecommerce World” webinar, which is summarized and posted below. In order to understand the solution available to you by Avalara, it is important to look at some of the problems your business may be facing, even without your knowing it.
What is Avalara?
Avalara is a powerful, cloud-based sales tax engine that is accessible to businesses of all sizes. Avalara’s sales tax solution has been designed and tested to work with Miva Merchant’s shopping cart to provide a seamless way to help businesses collect and remit sales tax. They also provide rate assignment, gift certificate management, returns filing, detailed reporting, and real time verification of rates.
How can Avalara help your business?
Whether you are new to online business or you are a large company that needs a more sophisticated tax system, there are numerous reasons why it is a smart decision to use Avalara. Perhaps, you are outgrowing the zip code-based rate tables, or you are doing taxes for multiple states. No matter the stage you are in, Avalara can scale their services to your business needs.
What challenges do businesses face due to sales tax?
There are a lot of people that don’t understand the challenges surrounding sales tax. So, Avalara brought to focus the main reasons why sales tax is difficult for most small to medium-sized businesses:
- 46 states today have some form of Sales and Use Tax
- A few states: NH, OR, MT, AK, and DE, have no sales tax (NOMAD States)
- Some states, like Alaska, have an additional or supplemental local tax
- There are over 11,000 tax jurisdictions in North America
- Tax rates are continuously changing
- New tax jurisdictions are created all the time
- Limited life taxes may cause higher taxes in certain radiuses
- Constant monitoring is necessary to make sure all of the changes are up-to-date prior to every transaction
The biggest challenge for business owners is to continuously manage, maintain, and update all of these tax changes in their systems.
Getting sales tax right involves the following three things:
- Having the right tax policy
- Having accurate tax content
- Applying that content in your system
What is required of merchants to collect tax?
There are a few things that you have to do before you collect state tax. If you are not registered for a Seller’s Permit (Sales Tax Permit), it is actually illegal to collect sales tax. So, you have to register your business. In addition to filing a seller’s permit with the state, you may also be required to do so with local tax authorities in: AL, AK, AZ, CO, ID, and LA.
Merchants are Responsible for Nexus
The key to tax every policy is to really understand where you are required to collect and remit taxes. Nexus, triggered when a company has a substantial physical presence in a state, is what states use to determine whether or not a business needs to collect tax in their state. Ecommerce merchants must have a connection to a state in which a customer resides for the merchant to be liable for sales taxes in that state, but states define Nexus in different ways, making it confusing for merchants. Some examples of Nexus you should be aware of include:
- Having traveling sales people that physically enter the state to conduct business
- Utilizing contract labor in any way or for any purpose in conjunction with the sale of tangible personal property or the performance of a service in the state
- Having marketing personnel and/or other company representatives in the state
- Being affiliated with individuals that enter the state for the purposes of conducting business or representing your business in any way, either directly or indirectly
- Owning or leasing any real or personal property located in the state
- Participating in trade shows or exhibits that promote your products or services in the state
Simplify Your Sales Taxes
Avalara simplifies all of this and more for e-commerce merchants. The web-based AvaTax™ service links directly to a your Miva Merchant shopping cart and calculates, in real time, whether you should be collecting sales taxes (and how much), from a customer during the checkout process. That way you can spend more time on customer service and selling your products than you do worrying about the taxes due.
As you might have heard, the U.S. Senate voted on April 25th, 2013 to move forward with the so-called Mainstreet Fairness Act, a legislation that would allow states to force retailers to collect online sales taxes. Avalara is uniquely positioned to help online vendors deal with this new challenge. As part of Avalara’s effort to educate companies that might be impacted by this legislation, they are hosting this webinar next Thursday, May 2nd, that we encourage every business to sign up for.