22 Oct Sales Tax Collection: What Small Businesses Need to Know
The 2018 landmark case of South Dakota v. Wayfair established that state and local governments had the right to collect sales taxes from purchases made online, no matter where the seller was located. “Tax Defense Ohio, why is this important?” you may ask…. well, with the pandemic pushing more people to purchase online, the tax impacts on small businesses is greater.
I thought I didn’t have to collect tax?
Well, most small businesses don’t, they fall below the economic thresholds required to remit tax. Most state rules set thresholds at $200,000 in sales to customers in-state and 200 transactions, but a few states recently lowered their thresholds, so you will need to look into individual state and local requirements. States like Arizona, Georgia and Tennessee lowered the sales amount limit, while other states are looking into gross receipts.
There are many online resources you can use to identify if your state or ones you do business in frequently have other tax requirements, or find a good B2B accounting firm (we’re partial to Tax Defense Ohio) that can do that research for you.
But still, why is this important?
Local departments of revenue are seeing shortfalls themselves, so tax experts anticipate tax collection activities to ramp up after COVID forgiveness programs run out. Keep your eyes peeled for news articles about your local government tax programs, and keep very detailed records.