How does selling in another state affect taxes?

[BrianBrite]

I'm trying to do as much research as possible before creating a website and selling so that there are minimal problems due to lack of knowledge. I'm a little confused on the sales tax part, I understand if I have a nexus and such I have to collect sales tax, but lets say I'm in Texas and I make a sale in Oregon, do I pay taxes from the sale to Oregon or to Texas, or does it matter what state I'm based in as well as where the sale is made?

[Moira]

Hey @BrianBrite,

Great question!

As an online seller, you are required to collect sales tax on orders shipped to customers in states where you have sales tax nexus. Sales tax nexus is generally established by having a physical presence in a state, such as a brick-and-mortar store or warehouse, but can also be established through other factors like online sales, affiliate relationships, or drop shipping.

When you make a sale in a state where you have nexus, you are required to collect and remit sales tax to that state. However, if you make a sale in a state where you do not have nexus, you are generally not required to collect sales tax on that sale.

In your specific example, if you are based in Texas and make a sale to a customer in Oregon, you would not be required to collect Oregon sales tax because you do not have nexus in Oregon. However, you would be required to collect and remit Texas sales tax on the sale because you have nexus in Texas.

It's important to note that sales tax laws can be complex and vary by state, so it's a good idea to consult with a tax professional or use a sales tax compliance service to ensure you are collecting and remitting sales tax correctly.

[weintegrate]

Hi Brian,

I would recommend you speak to your accountant for more details, however the basics are that there are Physical Nexus and Economic Nexus.  Physical Nexus is anywhere you have a physical presence, inclusive of where you are shipping from, your office location, etc.  Economic nexus kicks in for the areas where you don't have Physical Nexus.  In particular, while when you start you will likely have no tax obligation to any states that you do not have a physical presence, there are revenue thresholds that once you sell a certain amount, the state will expect you to start paying taxes.  For example, if you sell to customers in California, once you reach $500K in sales, California will expect you to start paying tax.

If you use QuickBooks Online, they do a decent job helping to manage this for you as long as you setup your addresses properly.

For some more information, feel free to check out our guide here, which also includes a link to more details from QuickBooks: https://community.weintegrate.co/t/what-is-tax-nexus-and-how-does-it-impact-me/188

[James1973]

Just to add to the replies you've already had as well.

You could look into this bridging software which was set up to work it all out for you.  It's a monthly subscription but the reviews are positive and they have a great customer support team on hand.

https://linkmybooks.com?fpr=trusted-brands-direct