Sales Tax Guide for Omnichannel Sellers

Written by Mark Faggiano on 06 January 2017

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Selling your wares on multiple channels has become the new normal over the past several years and lots of ecommerce sellers are integrating Amazon, eBay, and other sales channels with their primary shopping cart. There are lots of benefits to becoming an omnichannel seller. After all, it’s a great way to boost your growth and expand into new audiences. But when you have multiple sales channels, back-end administration like sales tax compliance gets exponentially more complicated, too.

There are three major factors to account for:

  • Making sure you’re collecting the right amount of sales tax on all of your sales channels
  • Reporting how much sales tax you’ve collected on every platform
  • Breaking down how much you’ve collected by state, city county and other special taxing district in order to file sales tax correctly

Let’s dig into each of those three aspects that make omnichannel sales tax tricky:

 

Sales tax collection

You’ll need to make sure that each of your sales channels is collecting the right amount in each state where you’re required to collect sales taxes. The collection capabilities of various platforms can vary widely. Amazon has a powerful and user-friendly tax collection engine that can deal with complex sales tax regulations. On the other hand, eBay only allows one sales tax rate per state. The more channels you’re dealing with, the more opportunity you have for error when it comes to collecting the right amount of sales tax from your customers.

 

Sales tax reporting 

When you’re only dealing with one sales channel, it isn’t difficult to figure out how much sales tax you’ve collected from buyers in a given state as you’ll just run a report through that channel’s admin panel. But when you’re on multiple channels you’ll have to run multiple reports and then combine those reports together yourself for each state. What a headache!


Sales tax filing

Most states will want to see all your taxes collected for that state broken down by city, county, and sometimes by other special taxing districts. This can be a pain with just one sales channel, but with an omnichannel approach filling out sales tax filing forms can become extremely time consuming.


Pro Tips for Staying on Top of Omnichannel Sales Tax Compliance

Now that you have a better idea of the challenges, let’s take a look at a few tips that will make the sales tax process easier:

 

Periodically review your nexus states 

Ecommerce sellers are required to collect sales tax and file sales tax returns in states where they have “nexus”–a significant presence in a state such as an office, remote employee, or warehouse. As you add sales channels, you may find that you have nexus in more states that you originally planned. Many Amazon sellers are surprised by finding out they now have sales tax nexus in each state where Amazon stores their merchandise. To help figure this out, we’ve created a post to help determine the states where you may have sales tax nexus.


Make sure you’re collecting sales tax from all channels 

The biggest issue we see with omnichannel sellers and sales tax is when sellers forget to set up sales tax collection on one of their sales channels. It’s really easy to check though–TaxJar has an “Actual vs. Expected Sales Tax Due” report to help determine if this is the case, and if so it’s a simple process of elimination to figure out which channel has a box that didn’t get checked.


Setup automated sales tax reporting and filing

The easiest way to deal with the headache of omnichannel seller sales tax compliance is to automate your sales tax reporting and filing. A sales tax automation tool like TaxJar will connect all of your shopping carts and marketplaces to a central repository to calculate your sales tax reporting, then create return-ready reports for you to file in each required state. TaxJar even has the ability to AutoFile your sales tax returns for most states to completely eliminate the headaches that come with sales tax compliance.


Utilizing multiple channels can introduce more problems, but a solid system in place can reduce or eliminate a lot of the pain of sales tax compliance. To learn more about sales tax for online sellers, please check out our Sales Tax 101 for Online Sellers guide or start a conversation in the Sales Tax for Ecommerce Sellers Facebook group!

Mark Faggiano
About the author
Mark Faggiano

Mark Faggiano is the Founder and CEO of TaxJar, a service that makes sales tax reporting and filing simple for more than 5,000 online sellers.