Paying Sales Tax for Small Business with Alex Oxford of Tax Valet - Amazing FBA - How to sell on Amazon UK
Paying Sales Tax for Small Business with Alex Oxford of Tax Valet

Do you need help in paying sales tax for your small business? Find someone who specialises in sales tax and eCommerce. Find out more on today’s episode.

Ongoing filings – how does this work?

You’ve got to now do your returns.

You’ll be given a frequency – monthly, quarterly or annually.

You’ll need to submit your sales tax return to the sates and pay it.

In some states, it’s 5 minutes’ work.

Some states eg Texas will take hours – city, county, district, special district.

DIY

It’s hard to do it manually without Software.

If you are planning to do it yourself, definitely use some kind of software

Eg: Taxjar, Taxify, Avalara

Getting help

Find someone who specialises in sales tax and eCommerce.

Even an accountant comfortable with eCommerce will probably not be able to help.

A “general” business accountant may well be no use at all in such a specialised area.

How do payments work? 

Once you have a US bank account that should be easy.

Tax collection

The collection should be fine once you’ve set it up.

There is however a lot of nuances when you’re setting it up.

The technology hasn’t caught up with the law either!

Technology Issues 

If you use a 3-party listing tool, it will often override account-level defaults for sales tax nexus.

If you launch 300 new SKUs and you don’t realise, that could be a big tax headache.

Amazon 

Basically, they have tools inside seller central that make it easy to collect sales tax.

They give you flexibility around charging for shipping and gift wrap etc.

There are a few issues where Amazon is collecting the wrong tax in Arizona. It’s off by 2%

There is proof that Amazon is not getting it 100% right. But it’s very close generally.

What about the argument that you are just making it easier for the states to chase you? 

There is some truth to making it easier for the states to find you.

If you don’t have a permit and aren’t registered with ANY local government, they’d have to audit a vendor or an Amazon warehouse.

Be aware that they DO audit Amazon warehouses all the time.

Liability

If you have substantial liability and ignore it for 10 years and get audited by a state, and have $100K in back tax liabilities, that is the kind of scenario that gets ugly. Bear in mind that you can’t really negotiate.

The risk for International sellers vs. Domestic

The risk of being audited is about the same for all sellers.

The number of businesses audited will be skewed towards the USA just because there are so many businesses.

What is the risk of an audit by states?

Generally, businesses get audited by states 1-3% of the time

States also share information with each other – even though they are not supposed to!

Risk when selling a business

If you are selling the business to another owner: when they do due diligence, if there are substantial sales tax liabilities, they will normally multiply that, take that off the amount they may.

Also for smaller business values (say under $1 million), you’ll often have a more amateur buyer eg: a retired doctor, lawyer, CEO etc. They are often much more risk-averse than the buyers (eg Private Equity funds) for bigger businesses. Having an open-ended liability in this kind of case could simply make your business almost unsellable.

Risk Aversion Varies – 2 Examples

Example 1: $1 million a year, nexus in 40 states.

They wanted to avoid all possibilities of future liabilities and simply registered everywhere.

Example 2: a client who lives around the world –  in Bali, Switzerland, etc.

Doing over $2million a year has nexus in 30/40 states.

Only got permits in 3 states! Alex pointed it out but she is happy to take the risk!

Parting thoughts

At least figure out your liability!

Check out their website: https://thetaxvalet.com/ 

 

Need more detailed help?

For more info on the subject, go to

FBA Sales Tax with Alex Oxford of TaxValet

Nexus Amazon with Alex Oxford of TaxValet