Posts Tagged ‘Sales Tax Nexus’

Business professional researching tax rates and using calculator

Calculating Sales and Use Tax: Leave the Hard Work to Us

A quick Google search will turn up lists of the worst jobs in the United States, ranging from simply gross (like tasting pet food) to the most dangerous (logging, according to the Bureau of Labor Statistics). We would like to add our vote to the list: calculating sales and use tax.

First of all, let’s be honest: at least some of you out there don’t actually know the difference between sales and use tax. (Here’s a hint: sales tax is collected from consumers, normally but not always, exclusively on in-state purchases. Use tax is paid in lieu of sales tax, by consumers on out-of-state purchases in many states, as well as wholesalers who buy goods that eventually become used in a taxable manner. For more detail, Sales Tax Institute offers a great resource on the difference between sales tax and use tax.)

Once you get that far, you’ll spend a significant amount of time figuring out tax jurisdictions. At what level do you determine sales and use taxes: the state level? The county level? Within a particular ZIP code? The answer to all of these is yes and no. Some states charge no sales or use taxes at all, others have different levels of sales versus use taxes, and still others have taxing jurisdictions that can vary by city or even from street to street. Keeping track of it all could easily become a second career – which is where we come in.

FastTax: new and improved tax calculation for 2019

Our DOTS FastTax service has always provided location-based sales and use tax rates and data, and has long leveraged our flagship DOTS Address Validation service to provide precise tax data for accurate US addresses. This year, we’ve made FastTax even more powerful with the addition of three new features:

  • The GetBestMatch operation that can analyze even bad addresses to obtain accurate tax data, often at a more precise level than ZIP codes.
  • The IsUnincorporated flag that allows you to bypass city tax rates in unincorporated areas. (And a new UnincorporatedTaxRate will be returned in a future release, to simplify this further.)
  • We’ve also added full support for US offshore postal territories such as Guam and Micronesia.

For a deeper dive, read our post on FastTax improvements, written by Jonas Shaefer, Director of Engineering.

Tax calculation designed for your applications environment

As always, our real-time API capabilities allow seamless integration with your sales and order entry automation environments. with a focus on data quality and ease of integration. We support REST, SOAP, GET and POST requests in XML and JSON formats, compatible with all major programming languages. Want to see for yourself? Check out our Developer Guide and sample code segments online. You can even get a free trial key to test in your developer environment right now on FastTax’s product description page.

With the help of Service Objects, calculating sales and use tax is no longer one of the worst jobs in America – except for our engineers and data source partners, of course. (But don’t worry, we actually enjoy it.) Need more information on implementing FastTax with your applications? Contact us to speak with one of our product experts, and we’ll help make your sales and purchasing work is a lot less taxing.

Determining Sales Tax Nexus: It’s Trickier Than You Think

If you sell products nationally, do you need to collect state or local sales taxes? The answer may be more complicated than you think.

In the United States sales taxes are levied at the state and local level, and normally need to be collected by you for sales in state(s) where you operate. (Fun fact: in other states they are often still due from the consumer, through what are known as consumer’s use taxes. The question becomes whether you, as a business, need to collect them at the time of sale.) As for these other states, your obligation to collect sales taxes depends on whether you have what is called nexus in these states.

Understanding nexus

The obvious case of sales tax nexus is when you have a physical, bricks-and-mortar sales presence in another state: for example, if I purchase a sweater online from Cincinnati-based Macy’s, they collect sales taxes for my home state of California because they also have physical stores here. But many other situations that can trigger nexus as well – here are some examples:

Employees and contractors. According to the Sales Tax Institute, having a “representative, agent, salesman, canvasser, or solicitor” in another state who is under your control, even temporarily, can create nexus. And in some states any telecommuting employee – selling or not – may trigger nexus.

Selling online. Laws are changing to recognize the huge shift in retail commerce from Main Street to online merchants. Thanks to a recent June 2018 Supreme Court decision, states now have the option of requiring online sellers to collect sales taxes for their states. In addition, more than 20 states now have what is known as “click-through nexus” for cases where you pay referral fees to in-state affiliates for sales via their web pages, usually triggered by a specified minimum volume of sales in that state.

Trade shows. If you sell products or solicit business at an out-of-state trade show – for example, by having a booth in the exhibitor hall that sells products or distributes literature to attendees – you may or may not be on the hook for sales tax nexus. State rulings vary widely, and while most differentiate between selling activities at a conference versus simply listening to speakers and eating mediocre banquet food, even one day of marketing activities can trigger nexus in some states.

When to bring in the pros

This brings us to an important closing point: determining your sales, local and use tax obligations isn’t a job for amateurs. If your business is large enough and does business nationally, it makes sense to contact a tax professional for guidance on where your business has nexus.

Once you have determined where you have nexus, you also need an automated tool to help you navigate a potential maze of state, local and special tax rates for each customer. Tax rates change constantly, and can literally vary from street to street within the same ZIP code, so this isn’t a do-it-yourself project for most businesses. Our DOTS FastTax service provides accurate, detailed tax rate data on an address-by-address basis, using an API interface that integrates seamlessly with major marketing or CRM platforms.

Want to learn more? Contact our experts to discuss your specific sales tax needs.