man working at computer

SamCart Blog

How To Charge Sales Tax & VAT With SamCart

New Features

Selling online just got simpler with brand new sales tax and VAT calculations built into every SamCart account. Whether you are selling services in your local area or online training to students around the world, SamCart’s new tax calculations keep your business compliant with ever-changing regulations.

. . .but in this world nothing can be said to be certain, except death and taxes.

Benjamin Franklin

A Quick Online Tax History Lesson

Yeah, we know, no one likes to talk about taxes. However, selling goods online is changing. What used to be the Wild West is slowly becoming a normal part of everyday life; with that comes big changes for online sellers.

Slowly but surely, different states across the US have extended taxes to include digital goods and services with rates between 1% and 7% percent. Member States in the European Union all have the abide within the European Union’s Value-Added Tax, with rates between 17% and 27%.

Australia charges a 10% tax on digital sales, but only after you meet a certain threshold in sales. In Canada, it gets even more confusing, where some provinces charge a tax on digital goods while others don’t. For sellers like us who sell online with customers all over the world, the “Big Ugly Tax” question feels like a minefield.

What rates do I charge? Are certain products exempt? Am I collecting the right information? What happens when one country changes their rates? How do I report all of this to the government? Now more than ever, it’s critical to use the tools at your disposal to automate as much as possible, especially for compliance-related tasks that where the liability is on you.

With SamCart’s new sales tax feature, we help you answer these questions to keep you in compliance and allow you to remain focused on growing business.

What Tax Rates Should You Be Charging?

The truth is, the IRS themselves likely can’t even tell you exactly what tax rates to charge your customers online, but we’re going to try our best!

Before we get into it, let’s define an important term: sales tax nexus.

Person doing taxes

Simply put, a sales tax nexus occurs when your business has some legal connection to a state. Two of the most prominent ways you establish this connection are through a physical presence or economic connection. First, let’s talk about economic connection.

Generally speaking, economic connection is achieved when your business hits a certain dollar amount or percentage of your sales in a state. Second, physical presence can mean many things, but here are a couple good examples of what would further define a physical presence sales tax nexus:

  • Having an office
  • Having a warehouse
  • Storing inventory
  • Having an affiliate*

 

If you have a strong presence with one of your affiliates, you may have an additional nexus that you are responsible for. Check out this post from our friends at TaxJar to further understand click-through nexus.

Whether it’s through economic connection or physical presence if you establish a sales tax nexus in a state, then you must collect sales tax from your customers in those states.

Ultimately, there are a significant number of resources online to further define what a sales tax nexus is (and we don’t have a legal team to back us up) so if you suspect you have a sales tax nexus in a specific state, contact that state’s taxing authority.

The second factor important to determining your tax liability is whether you live in an origin or destination state. After you’ve determined the state in which you have your sales tax nexus, understanding whether you need to charge your customers the tax rate of where you live (origin) or the tax rate of where you’re delivering your product (destination) will give you a full picture of your tax liability.

What about the European Union’s VAT?

Value Added Tax (“VAT”) is an additional tax that European Union (EU) member countries are responsible for. Lucky for anyone selling in the EU (or with customers buying from inside the EU!) SamCart has you covered!

EU flag

First, let’s talk about US sellers selling outside of the US. In short, since 2010, US sellers generally don’t need to register for VAT because of the reverse-charge mechanism.

However, for ecommerce sellers with a permanent-establishment (PE) in an EU-member country, VAT tax is the principle tax that must be collected on every sale. Ranging from 17%-27%, VAT tax charged based on your customer’s location, rather than the country in which your business has PE.

Ultimately, VAT regulations are exceedingly complex and while we make our best efforts to provide you information from our research, we recommend you consult a VAT expert for specific questions or if you are concerned you may be responsible for VAT.

SamCart Keeps Online Tax Simple

Confused yet? I bet you would rather have your full-service ecommerce platform track all of this for you. Fortunately, SamCart takes all the complexity out of trying to determine what tax rate you’re responsible for.

Simply add your Marketplace Address and VAT ID (if applicable) into your SamCart marketplace settings. Then, choose which products you want to start collecting sales tax for.

SamCart Nexus toggle

Boom. You’re done. SamCart will automatically find the right tax rates for each customer, and charge sales tax accordingly. It’s that simple.

A Quick Sales Tax Case Study

Let’s now put all of this together. You just started a business and you want to start collecting sales tax on SamCart. Your new company, The Fun Company, sells a course that you deliver to your customer digitally about event-planning. You live in Phoenix, AZ and since you’re the only employee with no offices in any other state, your sales tax “nexus” is Arizona.

Launch day is here. You’ve spent nights and weekends for the last 3 months building your course, designing your product page and drinking a dangerous amount of coffee to replace the lack of sleep.

Your first sale comes in from the Live Music Capital of the US (and home SamCart’s second office), Austin, TX. Under the hood, SamCart’s tax calculations determine that you do not need to charge a Texas resident any tax.

Taxes graphic

Because your product is being delivered outside of your sales tax nexus to a customer in Texas, you’re not liable to collect sales tax. First sale down, and you didn’t even need to bust out a spreadsheet (or an abacus).

Your second sale comes in from Tucson, AZ. Your customer is extremely excited to dive into your product, but before they checkout, SamCart adds a sales tax of 5.6%.

Collect sales tex graphic

SamCart automatically identifies what taxes you are liable for, and which ones you don’t need to worry about. So every customer is taken care of, and your business is protected.

Get A Demo Of SamCart Today

The Right Tax Rate, Every Time

As we’ve seen, there are a number of factors that determine the sales tax rate for a single order. Do you have a sales tax nexus in an origin state or a destination state? How do you calculate sales tax if my customer uses a different billing and shipping address? Which tax code does your product map to? What if my customers don’t type in their address correctly?

Taxes Graphic SamCart

SamCart can reliably take the information from your product page and return a sales tax rate that is accurate down to even your customer’s local district.

By leveraging technology used by thousands of other businesses around the world, SamCart is able to reliably determine state, county, city and district tax rates so you remain in compliance and never run the risk of having to come out of pocket to cover a large tax bill.

SamCart is empowering thousands of small business owners to focus more time & energy into growing their bottom line, by providing tools that help simplify selling online. And automatic sales tax calculation is just the newest tool at your disposal.

We’ve Got The Data

Now that SamCart has collected all your tax information, how do you get it out during tax time? Our detailed tax report will show you all your SamCart orders where taxes applied as well as a detailed breakdown of all applicable taxes.

Samcart taxes chart

Not only will you be able to see all your tax data on a single dashboard, your accountant will love the simplicity of having to look at one report to reconcile your tax liability from your ecommerce sales when tax season rolls around.

Get A Live Demo Today

Want to get a live look at all the ways SamCart is simplifying online sales? Get a live demo of SamCart today, and see exactly how SamCart can help take your business to the next level.

Visit SamCart.com and sign up for a SamCart Demo today! Our team will answer your questions, and show you exactly how SamCart customers have sold more than $1 Billion of their own products on the platform.

Get A Demo Of SamCart Today

Click the link above, and sign up for your demo today. Sales Tax, and all the other tools SamCart has for growing your Ecommerce business, are waiting right inside.

Background image

Try it free for 14 days. Cancel anytime.