6 Tax Tips for Your Business If You Do Interstate Transactions
Interstate transactions used to be something businesses only handled if they had grown big enough to become regional or national players. Now, e-commerce and a nationalized economy mean that nearly any business might wind up doing interstate transactions. This can have many different tax implications.
If your business has grown beyond your state’s boundaries so that you operate in more than one location, this can trigger tax complexities you need to address. Here are some to consider:
- Sales Taxes: Most of the time, you obey the sales tax rules for the particular state you operate out of in terms of collecting and remitting. Then again, the majority of states also mandate you collect and remit taxes for transactions involving any buyers in their territory no matter where you are.
- Nexus Requirements: For a state to require sales tax from you, then you would typically need to have a physical presence or nexus there. That might include a brick-and-mortar facility, affiliate locations, delivery vehicles, or even agents delivering goods for you.
- Filing State Returns: The concept of nexus or connection applies again in terms of filing business returns because you have to file a return in any state where you have an established nexus. Keep in mind that while business returns might be an annual obligation, the remittance of sales tax has a different schedule in every state. Some might be yearly, but others might be quarterly or even monthly.
- Selling Through Amazon Complicates Things: Many businesses that have interstate transactions sell their goods through Amazon. However, if you use Fulfillment by Amazon to store your goods in their warehouses, you might wind up forming a nexus via Amazon in any state where they have warehouse facilities.
- Use Taxes: Nearly every state has a use tax in addition to or even in lieu of sales taxes. It’s the buyers and consumers that usually have to report this via their own tax return, though. Just make sure you are upfront and provide them with disclosure about their own tax obligations.
- Keep Up With Things: Ignorance of any laws won’t get you off the hook for potentially violating them. Stay up to date with changes to the laws in every state you do business in so you can avoid fines and penalties.
Car Shipping Is a Common Sector for Interstate Transactions
One particular sector that involves interstate transactions a lot more than it used to is shipping passenger vehicles. As digital car sales grow, there has been a surge in the demand for shipping cars interstate, as seen in the growth in auto transport companies in Florida and across the US.
Furthermore, as the population swells with families, couples, and individuals moving in from other states, they need their vehicles shipped when they move. There are also many people buying cars from out of state in Florida that likewise need similar shipping, and cars also leave the state the same way.
Between private sales and online dealerships, many vehicles are moving in and out of the Sunshine State on a regular basis. According to Car and Driver, anyone buying a car in Florida must pay a 6% sales tax, regardless of where the vehicle is coming from.
There are two steps you can take to make things easier on yourself if you have interstate transactions as part of your business:
Find the Right CPA: If you have a professional to do your business taxes, then they can make sure you are compliant with all the right rules. Just make sure they have experience with the state and interstate tax laws that apply to your transactions.
Automate Things/Go Digital: There are websites, software, and apps you can use to track your individual transactions. You can even keep and sort data based on the transactions, volumes, amounts, and locations of buying and selling. These are the sorts of details that determine what taxes apply and at what rates.
It’s Usually Worth It
While operating in multiple states can mean increasingly complicated tax circumstances, it also means that your products and services are being made available to a national market. The increased reach from which you can profit is typically more than worth any complexities or hassle that arise.