If you are a small business, listen up! The Small Business Administration (SBA) has some great news for businesses that are still struggling through the pandemic. In December 2020, Congress voted to allocate an additional $284 billion to the Paycheck Protection Program (PPP). The PPP is a forgivable loan program established by the CARES Act. The SBA and the Treasury Department have reopened the PPP loan portal, so small business owners, like you, will be able to apply for extra aid. You’ll have to act fast, though, because the deadline for new loan applications is March 31, 2021. Learn more.
Why E-Commerce Businesses Should Work with a Tax Professional
Let’s face it: Navigating e-commerce business taxes and tax laws is confusing and tedious.
By Andrea MacDonald, CPA
In recent years, sales tax rates have been constantly changing, and that complicates sales tax charges. It’s easy to get lost in the weeds! As an e-commerce business owner, tax planning is crucial to your operations, but that doesn’t mean it needs to be stressful. Instead, hiring a tax professional can make complying with sales tax regulations far easier.
Hiring a tax professional to manage e-commerce tax planning has many benefits. For example, working with someone who understands tax legislation gets the job done fast. This gives you time to focus on other business areas. Additionally, e-commerce sales tax rates are complex and ever-changing. Incorrect collection and filing mean hefty fees and fines. A Certified Public Accountant will ensure compliance to avoid fines. They’ll be current on the existing laws, and they can be a great resource in restoring peace of mind.
E-Commerce Tax Works Differently
E-commerce tax is notoriously murky and complex territory. It makes it hard for business owners to prepare in advance. Even prior experience managing traditional sales tax does not mean you’re ready to take on e-commerce tax planning. That’s why you’ll want a professional on your side to avoid these top (costly) compliance mistakes:
Not filing because no tax was collected:
A CPA will make sure you file on-time each reporting period – even if you didn’t collect anything.
Losing track of different states’ filing rules:
A CPA remains the current sales tax rates and collection requirements.
Reporting the wrong numbers:
If your state requires tax breakdowns based on jurisdictions or other categories, a CPA will compute accurate numbers.
It Varies Across States
Unlike sales tax for brick-and-mortar stores, e-commerce sales tax varies across states. When a CPA determines how much sales tax your e-commerce business needs to pay, they’ll be looking at the following factors:
Where you’re doing business
This includes physical location, like the location of employees or contractors, storage location, and transaction/sales location. Most states require you to pay sales tax wherever your physical location is, but this can vary with new legislation.
If you’re selling products through affiliates, you might have to pay sales tax on those products wherever they’re sold. This is a tricky area of e-commerce business taxes. A CPA will help discern what legislation your state has and file accordingly.
It’s also important to note that many states have set laws about when sales tax is applicable based on sale thresholds. For example in Virginia, “Marketplace facilitators and remote sellers that have economic nexus in Virginia (i.e. more than $100,000 in annual Virginia gross sales or 200 or more transactions to Virginia customers) must register to collect and pay sales tax starting July 1, 2019.” (tax.virginia.gov)
So, if you were selling products to consumers in Virginia, you wouldn’t have to worry about paying sales tax until your sales reached that threshold. Every state’s limit changes over time, so you’ll want to make sure you stay on top of where every state you have sales in stands.
Hiring an E-Commerce Tax Professional
Once you determine that hiring a tax professional is right for you, you’ll want to select one based on their training, background, and license. There are many different types of tax professionals. Specifically, look for Certified Public Accountants, or CPAs. They are certified by the state and are generally highly trained. CPAs are also required to undergo continued education. This is crucial in making sure your tax professional stays up to date with the various sales tax regulations.
Of course, CPAs come in a variety of specializations, so be sure the one you choose has e-commerce tax experience. E-commerce business taxes are complicated and confusing, even for the most seasoned business owners. Leave the DIY for other areas of your business. Don’t waste time and energy muddling through the tax laws for each state. Hire a tax professional to stay compliant, and restore peace of mind.
If reading this has created more questions and you need help, contact our office. Call (757) 420-1539
Andrea MacDonald, CPA is the owner of Pro Tax & Accounting in Chesapeake, Virginia. For nearly two decades, she has been working with businesses on their bookkeeping, accounting and taxes. She also works with individuals and families on their tax returns. Andrea is a Certified Public Accountant (CPA) and a qualified bookkeeper and tax professional. She is well-versed in tax law, which makes her an invaluable resource for any business.
At Pro Tax & Accounting, we keep you from breaking the bank!
Pro Tax & Accounting is your go-to team for E-Commerce Tax Laws, accounting services, businesses bookkeeping, QuickBooks Consulting, payroll, and tax services. President and owner, Andrea MacDonald, CPA, is a Certified Public Accountant. Andrea and her team have the experience, education, and knowledge. They work with businesses throughout the Hampton Roads Virginia cities of Norfolk, Virginia Beach, Chesapeake, Suffolk, Hampton, and Newport News, north into Williamsburg and throughout the mid-Atlantic region. And thanks to technology, Pro Tax & Accounting can work with clients anywhere in the world!
Call today! Free up the time you need to run your business. Leave the E-Commerce bookkeeping and accounting up to the experts!
Call Pro Tax & Accounting for your
Bookkeeping & Accounting Services. (757) 420-1539