Ecommerce and Tax
Working as an e-commerce seller seems fun and games, since nothing is more attractive than the idea of sourcing your products from, let’s say, a distributor, and selling them on online marketplaces. However, this idea crashes and burns when the seller faces the harsh reality. This is when the sources you acquire your products from charge you Sales Tax when they sell you their inventory. At first, it sounds pretty unfair and we understand where this perception comes from.
Despite the leading role of e-commerce, it is still considered as something virtual, something unreal. This is the reason e-commerce sellers don’t understand the concept of these taxes, because just like e-commerce, they seem artificial and virtual. Unfortunately, e-commerce also has taxes, and provided you want to run an ecommerce business and are thinking of starting an ecommerce store, you should meet the requirements, unless you are already Tax Exempt with the help of our Prestige Auditors specialists in this field.
What is Sales Tax and Why Do You Need It?
Let’s start from defining the term, because this way its concept will be easier to understand.
Sales tax is basically a consumption tax, which is charged on the sale of products from retailers to individual consumers. In this case, an e-commerce seller, let’s say, seller A, acquires products from a source B, for which he is being charged a Sales Tax. But why on earth people came up with the idea of this tax? The answer is simple. Sales Tax revenue helps state, country and local municipalities develop their communities. For example, a portion of Sales Tax is used to develop public services (schools, libraries, etc.), special purpose projects and all that jazz.
Taxes Are Confusing
Confusion is a common thing, when it comes to taxes. Let us clarify. There are certain retailers, distributors and other sources that are not required to collect Sales Taxes in some states; this however, depends on the business activity of the source you’re acquiring your products from. Yes, you got that right: the one who collects Sales Tax is the one selling you products. It can be a manufacturer, distributor and others, does not make much difference.
Which Products are Taxable?
To see the bigger picture, let’s have a look at the products that are taxable. In general, the majority of tangible products are chargeable, which means anything you can see and touch will require taxes. In other words, if you want to start an ecommerce business and have decided the products you are going to sell, you are most likely to deal with such a thing like Sales Tax.
Even though a portion of Sales Tax is used for a noble cause, it still requires additional expenses, which can be used to your advantage. With the financial resources that go to covering the Sales Tax for the products you source, your online business could grow much faster than it is right now. You could have invested it in something important, something like business or marketing strategies, advertising or audit of your store. This is the reason that Prestige Auditors offer you a perfect opportunity to become tax exempt and not to overpay for things you could easily avoid.