I am a small business owner. I don’t own a brick and mortar building, staff, nor do I keep an inventory. When I started as a business owner, it never crossed my mind that I would be affected by a sales tax nexus. I thought that only larger businesses would be subject to having to deal with a state sales tax. Well, I was wrong.
What is sales tax nexus?
Sales tax nexus occurs when your business has some kind of connection to a state. This could be a physical storefront, or online presence. There are a number of things that would create a nexus, or connection, to the state you reside in. If you have a home office you work from to make goods or services to sell, that is a connection. Do you keep an inventory on hand of goods to sell? That’s a connection. Do you sell items at a craft fair? You got it, that’s a connection.
Basically, any time you are doing business by selling a good or service, you are creating a nexus, or connection. I live in Indiana, so lets take a look at what the sales tax nexus is like here. The law for Indiana says that if you have either $100,000 in sales, or 200 transactions, you are required to collect sales tax to remit to the state. Sales of tangible personal property, electronically delivered products, and taxable services into the state all qualify as eligible transactions. Now, thankfully, you don’t have to register to collect and remit sales tax until you hit the threshold set forth by your state.
Now, I highly suggest that you find a company that has experience dealing with this, to help you stay within the laws. There are many companies out there, but Taxconnex is a great one to consider. These types of companies will work with you, to ensure you are in compliance with your local laws. They will help you assess whether you are at the threshold of needing to collect and remit sales tax.
Now, while some states, like mine, have thresholds of $100,00 in sales, or 200 transactions, some states are different. Some states require that you collect and remit state sales tax for every transaction, regardless of how much revenue or how many transactions there are. This means that even 1 transaction or sale will have you collecting sales tax to submit to your state.
Now, let’s clarify something, shall we? If you are selling items on eBay, this is still going to apply to you. Just because it’s an auction site, doesn’t mean it’s exempt. I sell random items on eBay, so I’m required to keep track of transactions and sales and once I hit the threshold, I will have to start collecting sales tax to send to the State of Indiana. Keep in mind, some states require you to collect on each transaction, so even if it’s your first sale on eBay, your state might require you to collect the tax. You want to make sure you are thoroughly reading the laws for your state, so you can keep in compliance and avoid any consequences.
Majenica
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