Collecting Taxes - State and Local - USA

[CyberVinnie]

There is definitely some interesting reading regarding income tax reporting, but I don't see much discussion about sales tax.   I am gearing up to begin selling off 30+ years of collectibles aside from my LEGO stash that is constantly in flux (ever growing).

I've been a casual seller on eBay for over 15 years now, but only just recently have I begun to get all of the paperwork in place to become a licensed and registered business (Sole Proprietor).   The collectibles were not purchased for profit, but they are still MISB or MOC, so those I'm not too worried about and will most likely start with liquidating those.    Combined with LEGO sales, most of which were purchased in multiples for the express purpose of resale at a later date, I'm sure that by the end of 2016 I will have sold enough stuff to trigger the tax man.

I picked up Skip McGrath's book the other day since so much has changed since the last time I sold something on eBay more than two years ago.  He talks a lot about the legal necessity of getting a state tax license to collect sales tax and charging tax on all eBay transactions where appropriate (varies by state and I also learned for the first time about a "nexus").   I suspect Amazon is no different.   How many of you actually do this?   If the IRS can find you, I'm sure the local bean-counters can as well.  I've engaged with TaxJar to build the knowledge and kick things off.

Just curious.

Edited December 3, 2015 by CyberVinnie

[redcell]

Be careful with the "advice" that Taxjar gives you.  If you're selling on Amazon, they will tell you that you have to collect sales tax in every state where Amazon has a fulfillment center.  Obviously, it is in the best interests of their business to tell you this because their service greatly simplifies the process of reporting sales tax from multiple jurisdictions.  However, I am not convinced that what they have to say about the ability of fulfillment centers to create a nexus for sales tax purposes is as universal in its application as they would have you believe.  You will definitely have to collect and report sales taxes in the jurisdiction in which you live because you clearly have a nexus there.

I collect sales tax for sales made to people in the state in which I live.  Without Taxjar, Amazon makes it somewhat easy to navigate if you have some familiarity with how sales taxes work in your state.  I'm sure that Taxjar simplifies the process to a much greater degree, but I'm also sure that it costs a lot more than what Amazon does for you for free.

[BrickLegacy]

I passed on Amazon FBA because I was worried about the "nexus" issue.  I brought this up to two different accountants, and they both agreed that you could be at risk.  They weren't, however, experts in online retail so I'm sure I could have looked for a 3rd and different opinion.  It really depends on your situation and how your accountant and lawyer advises you.  For me, I wanted the piece of mind to enjoy my small business venture without worrying about the possibility of some state auditor bugging me 3 or 4 years down the road and dealing with the headaches and paperwork to be compliant.

Redcell is right, it's in TaxJar's best interest to educate Amazon FBA sellers about nexus.  In fact, their business model depends on it.  If you Google Amazon FBA and nexus , most of the information is linked back to TaxJar.  Some people will say it depends on how big you are.  For me, it was about piece of mind.  Either way, you must account for sales tax for the state in which you live. At least that's my understanding of the law.

 

[CyberVinnie]

27 minutes ago, BrickLegacy said:

I passed on Amazon FBA because I was worried about the "nexus" issue.  I brought this up to two different accountants, and they both agreed that you could be at risk.  They weren't, however, experts in online retail so I'm sure I could have looked for a 3rd and different opinion.  It really depends on your situation and how your accountant and lawyer advises you.  For me, I wanted the piece of mind to enjoy my small business venture without worrying about the possibility of some state auditor bugging me 3 or 4 years down the road and dealing with the headaches and paperwork to be compliant.

Redcell is right, it's in TaxJar's best interest to educate Amazon FBA sellers about nexus.  In fact, their business model depends on it.  If you Google Amazon FBA and nexus , most of the information is linked back to TaxJar.  Some people will say it depends on how big you are.  For me, it was about piece of mind.  Either way, you must account for sales tax for the state in which you live. At least that's my understanding of the law.

 

Well, I don't currently have an accountant and my legal issues are being handled by LegalZoom (at least in the short term to get the ball rolling).   Thankfully, I have good friends with their own businesses and also working in law firms, so I'm covered for the most part when it comes to mentoring and advice (aside from all the great people on here :)).   It's just that none of them have ever dealt with eCommerce.

Any experience with LegalZoom?   I just filed for the DBA and EIN (no one needs to know my personal SSN) yesterday.   I doubt I will have everything in place before Christmas, but I plan to be poised, educated and legal for the January gift-card frenzy.

Edited December 3, 2015 by CyberVinnie

[BrickLegacy]

18 minutes ago, CyberVinnie said:

Well, I don't currently have an accountant and my legal issues are being handled by LegalZoom (at least in the short term to get the ball rolling).   Thankfully, I have good friends with their own businesses and also working in law firms, so I'm covered for the most part when it comes to mentoring and advice (aside from all the great people on here :)).   It's just that none of them have ever dealt with eCommerce.

Any experience with LegalZoom?   I just filed for the DBA and EIN (no one needs to know my personal SSN) yesterday.   I doubt I will have everything in place before Christmas, but I plan to be poised, educated and legal for the January gift-card frenzy.

No experience with Legal Zoom.  My accountant setup my EIN and the DBA form for my state was pretty self-explanatory. For anyone else reading this thread, It's important to do a search for the name you plan to use first so its not already in use.  When in doubt, call an accountant or lawyer.

[redcell]

54 minutes ago, CyberVinnie said:

Well, I don't currently have an accountant and my legal issues are being handled by LegalZoom (at least in the short term to get the ball rolling).   Thankfully, I have good friends with their own businesses and also working in law firms, so I'm covered for the most part when it comes to mentoring and advice (aside from all the great people on here :)).   It's just that none of them have ever dealt with eCommerce.

Any experience with LegalZoom?   I just filed for the DBA and EIN (no one needs to know my personal SSN) yesterday.   I doubt I will have everything in place before Christmas, but I plan to be poised, educated and legal for the January gift-card frenzy.

Never dealt with LegalZoom...I generally just figure stuff out on my own.  Most of the basic stuff like EINs, DBAs, and setting up companies isn't that difficult to figure out if you have the time to dig into it.  I don't get the connection between setting something up and the gift-card frenzy.   

[CyberVinnie]

On 12/3/2015 at 4:03 PM, redcell said:

Never dealt with LegalZoom...I generally just figure stuff out on my own.  Most of the basic stuff like EINs, DBAs, and setting up companies isn't that difficult to figure out if you have the time to dig into it.  I don't get the connection between setting something up and the gift-card frenzy.   

There may not be any connection.   And the more I think about it, I may be over-complicating things.

If I didn't already work a full-time job that eats the majority of my brain space, I'd probably just do everything myself.   I liked the LegalZoom "fire and forget" methodology.   All I've had to do so far was print a couple of documents to have notorized.   Everything else (including the DBA search, licenses, etc.) are moving along all by themselves and at reasonable cost.