Remote online sellers face a changing legislative environment when complying with online sales taxes.
A bill (Senate Bill 126) recently submitted in Florida for the 2020 legislative session aims to require local and remote Internet sellers to collect and pay sales taxes. Currently, Florida consumers are responsible to pay sales taxes on online purchases from out of state sellers.
The Florida bill follows similar actions taken by more than 40 states after a 2018 U.S. Supreme Court ruling (South Dakota v. Wayfair Inc.) allowing South Dakota to collect sales tax from online purchases regardless of a physical presence within the state.
If passed, the Florida bill would impact remote sellers with over $100,000 in sales or 200 or more retail sales transactions annually.
Remote sellers encompass a range of businesses from large corporations like Amazon and Walmart to small home-based businesses. Basically, states consider any business without a physical state presence that a makes an internet sale in that state to be a remote seller.
Regardless of your business size, if you’re a remote internet seller you should become knowledgeable about the internet sales tax laws in States where you make sales.
Below, we provide helpful information on the current state of internet sales taxes.
States that Require Remote Sellers to Pay Internet Sales Taxes
Remote sellers that have established an economic nexus within a state that requires an internet sales tax may be required to collect sales taxes.
An economic nexus is established when remote online sellers make sales in a state even when they do not have a physical presence. State laws on economic nexus vary with regards to the sales threshold that would trigger sales taxes.
Thresholds vary from state to state.
Guide to Economic Nexus Thresholds that Trigger Remote Sellers to Collect Sales Tax on Online Sales
Below is an October 2019 sales amount threshold snapshot of states requiring online sales taxes.
- Alabama: $250,000
- Arizona: $200,000 in 2019, $150,000 in 2020, $100,000 2021 and beyond
- Arkansas: $100,000 or 200 separate sales transactions
- California: $500,000
- Colorado: $100,000
- Connecticut: $100,000 or 200 separate sales transactions
- Georgia: $250,000 or 200 separate sales transactions s ($100,000 starting January 1, 2020)
- Hawaii: $100,000 or 200 separate sales transactions
- Idaho: $100,000
- Illinois: $100,000 or 200 separate sales transactions
- Indiana: $100,000 or 200 separate sales transactions
- Iowa: $100,000
- Kansas: $0 (all remote sellers meet the state’s economic nexus regardless of size)
- Kentucky: $100,000 or 200 separate sales transactions
- Louisiana: $100,000 or 200 separate sales transactions
- Maine: $100,000 or 200 separate sales transactions
- Maryland: $100,000 or 200 separate sales transactions
- Massachusetts: $100,000
- Michigan: $100,000 or 200 separate sales transactions
- Minnesota: $100,000 or 200 separate sales transactions
- Mississippi: $250,000
- Nebraska: $100,000 or 200 separate sales transactions
- Nevada: $100,000 or 200 separate sales transactions
- New Jersey: $100,000 or 200 separate sales transactions
- New Mexico: $100,000
- New York: $500,000 and 100 separate sales transactions
- North Carolina: $100,000 or 200 separate sales transactions
- North Dakota: $100,000
- Ohio: $100,000 or 200 separate sales transactions
- Oklahoma: $10,000
- Pennsylvania: $100,000
- Rhode Island: $100,000 or 200 separate sales transactions
- South Carolina: $100,000
- South Dakota: $100,000 or 200 separate sales transactions
- Tennessee: $500,000
- Texas: $500,000
- Utah: $100,000 or 200 separate sales transactions
- Vermont: $100,000 or 200 separate sales transactions
- Virginia: $100,000 or 200 separate sales transactions
- Washington: $100,000
- Washington DC: $$100,000 or 200 separate sales transactions
- West Virginia: $100,000 or 200 separate sales transactions
- Wisconsin: $100,000 or 200 separate sales transactions
- Wyoming: $100,000 or 200 separate sales transactions
How Remote Sellers Collect Sales Taxes on Online Sales
Many states have enacted laws requiring remote online sellers to register, collect, and file sales taxes on purchases where they’ve established an economic nexus.
If you have an online ecommerce business, you also have to keep track of all sales tax jurisdictions—from local towns to state level.
Many businesses making remote online sales will use an automated service that tracks multiple tax jurisdictions and applies the proper sales tax amount on checkout.
Additionally, many remote sellers have opted to sell their products with third-party marketplaces such as Amazon, eBay, or Etsy. These third-party marketplaces handle the sales tax collection directly with the consumers.
Are You a Remote Seller? Delegate Your Online Sales Tax Research.
If you’re a remote online seller, you’ll be required to keep up with the various state laws pertaining to online sale taxes. A Virtual Assistant can take on this research task plus find solutions that could benefit your business when dealing with multiple locations.
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Online Sales Tax and Remote Sellers Frequently Asked Questions (FAQ)
Below are FAQs about online sales taxes and remote sellers.
What is a remote seller?
Remote sellers are out-of-state sellers. Ranging from large corporations to small home-based businesses, remote sellers sell products to consumers where they do not have a physical presence.
Do remote sellers have to collect sales tax on all internet sales?
In many states, online sellers are required to register to collect sales tax on purchases made in states they’ve established a physical presence. Since the U.S. Supreme Court South Dakota v. Wayfair Inc. ruling, many states have enacted laws requiring remote online sellers to collect sales taxes on purchases where they’ve established an economic nexus.
What are economic nexus laws?
An economic nexus is established when remote online sellers make sales in a state even when they do not have a physical presence. With an online sale, these businesses have essentially established an economic presence in a state. State laws on economic nexus vary with regards to the sales threshold that would trigger sales taxes. Thresholds may vary from $10,000 to $500,000 in sales or a certain number of sales transactions.
How do remote online sellers collect and file sales taxes in states where they do not reside?
Collecting sales tax on internet sales requires a business to get a Sales Tax Permit for the State where they make sales. Each state varies on method and fees for the permits. Businesses need to track multiple sales tax amounts since states vary in the taxes owed for purchases. Some businesses use automated online services to apply the proper sales tax amount for purchases made online. Additionally, many remote sellers have opted to sell their products with third-party marketplaces such as Amazon, eBay, or Etsy. These third-party marketplaces handle the sales tax collection directly with the consumers.