Setting Up Online Sales Tax Collection« Back to Questions List

Sales Taxes are based on where the consumer takes possession of the product. It works great for brick-and-mortar but creates a mess for online sales. So if you ship art all over the US, which I’m assuming, it can get very complicated to do the sales tax stuff yourself. Specifically, what makes online sales complicated is the various taxing jurisdictions, including State, County, City, and even special taxing districts. Each jurisdiction has its own unique Safe Harbor thresholds, which is when you are required to obtain a tax license and start to collect sales taxes. The thresholds can be defined by the number of units sold and/or total sales volume. Generally, that sales volume is about $600 in total sales in any jurisdiction, but they vary. For the record, we have over 275 different taxing jurisdictions in Colorado alone. Then there are issues with Home Rule cities that collect their own taxes. Very complex. The easiest way to handle sales tax with online sales for most small businesses is to use a marketplace facilitator such as Amazon, Etsy, eBay, and Wayfair, to name the most popular ones. Marketplace facilitators generally charge a small listing fee and then keep a portion of the sale price to cover its expense and return a profit. Fees vary but generally are about 10-12% to cover payment processing and transaction fees. What makes using a marketplace facilitator a good option is that with the exception of the small listing fee, often less than $1, there are no costs unless you make a sale. Assuming you have an eCommerce website you are using to sell your art, an alternative to using a marketplace facilitator to collect and remit the sales taxes is to install sales tax software on the site to compute the sales tax automatically based on the customer’s shipping address. The most popular sales tax software includes TaxJar, Avalara, Sovos, and Davo. These tools charge a monthly fee and additional fees if they collect and remit the sales tax for you. They are generally cheaper than a marketplace facilitator on a transaction level but have a fixed price component in the form of a monthly fee. Generally, this option is best for businesses with a higher and more consistent volume of sales. Here is a search link that you can use to search SteveBizBlog for more information about sales taxes. https://www.stevebizblog.com/tag/sales-tax/ Hope this helps, Steve