Sales Tax deadlines are upon us, sellers! But don’t panic, I invited the experts from TaxJar back to write an extended article about how you can manage your Sales Tax this year. So if you are trying to decide whether you are going to do it yourself, hire a professional, or automate it with software, check this one out. In his last post, Mark Faggiano, CEO of TaxJar, explained how Amazon Sales Tax works. This follow up takes this one step further to explain how to file those taxes!
If you’re like many Amazon FBA sellers, the first time you pulled an Amazon sales tax report, your reaction ranged from “What on earth is all of this?” to “Aaaaaah!”
For Amazon business owners, when it comes time to file sales tax you, you have a few options:
1. Do it yourself – try to muddle through this report and figure out sales tax filing on your own
2. Hire a CPA – pay someone professional rates to do this for you
3. Automate it – Use technology for all the heavy lifting
Assuming you’re not yet at the stage where you have a CPA on call, we’ll look at the pros and cons of DIY sales tax vs. sales tax automation.
Do-it-Yourself Sales Tax Filing: The Pros
- Save money – Many new or very small business owners have more time on their hands than money rolling in. If you’re at that not-yet-profitable stage, every penny you can save counts.
- Know your business intimately – Many business owners believe it’s important to know every aspect of your business backward and forward. If this sounds like you, then it’s important to get a handle on just exactly what all sales tax filing entails.
Do-it-Yourself Sales Tax Filing: The Cons
- Waste valuable time – Writing a new product listing is potentially profitable. Meeting with a new vendor is potentially profitable. What’s not profitable? Collecting and reporting sales tax and filing your sales tax returns. As your business grows, your time becomes a limited quantity. Ask yourself if spending hours filing unprofitable sales tax returns is the best use of your time.
- Decipher Amazon’s sales tax report – Here’s an example Amazon sales tax report. You’ll find the info you need to fill out a sales tax return starting If you scroll over to column AR. Then you’ll need to work from column AR to column BQ.
- To fill out a sales tax return, you must break down the Amazon sales tax you collected from each customer by county, city state and other special taxing district. Here’s an example of one transaction in Santa Rosa, CA.
As you can see, this single transaction spans 10 different types of sales tax. Your next step would be to find every other matching type of sales tax in this report (California state sales tax, Santa Rosa City sales tax, Agricultural Preservation & Open Space District sales tax, etc.), add those numbers up, round them up or down, and then include them in your sales tax filing. But wait, there’s more…
Multi-channel? Then decipher other channel sales tax reports, too – If you sell on multiple channels, you need to find out how much sales tax you collected from buyers on your other platforms, too. And since other platforms don’t give you as much info as Amazon, you may find yourself trying to figure out what county and special taxing district your buyer’s ship-to address falls into.
I think you see where we’re going with this. Reporting how much sales tax you’ve collected form buyers is a major pain!
Is it Time to Automate Your Sales Tax Filing?
When you automate your sales tax reporting and filing, all that math, and cross-referencing and trying to determine which agricultural district Santa Rosa falls into, disappears. Instead, your sales tax software will give you a return-ready sales tax report with amounts you can quickly and easily enter into your state’s online sales tax filing system. Or, if you’d rather never look at another sales tax filing every again, you can choose automated filing and be done with it.
There are a few more reasons you may want to automate your sales tax reporting and filing:
- Forget about sales tax due dates – Every state’s sales tax due date is different. First of all, depending on your individual situation and sales volume, you may file sales tax monthly, quarterly, annually or even semi-annually. Due dates vary, too. While many states want you to file sales tax by the 20th day of the month following the taxable period, some states buck the trend and want to hear from you by the 15th, or the 23rd or the last day of the month. It’s not uncommon for an online seller to find himself paying sales tax to one state monthly on the 20th, another state quarterly on the 15th, and yet another state annually on the last day of the month. If you’re tired of keeping up with these dates – and paying penalties if you miss a filing – maybe it’s time to automate your sales tax life.
- Claim your discounts – About half the states with a sales tax allow taxpayers to claim a 1-2% discount when filing sales tax on time. But you must remember to claim your discount and do the math so you claim the right amount. With sales tax automation, you claim your discount automatically, and keep that money in your pocket.
- Enjoy peace of mind – Last but not least, there’s something to be said for taking one of your many, many tasks off your plate for good. You’re a busy business owner. Why not outsource the things that won’t make you money – like sales tax – so you can focus on the things that will boost your bottom line.
I hope this post has showed you the pros and cons of automating your sales tax life. For a whole lot more info, check out our Sales Tax for Amazon FBA Sellers guide. Have questions or something to say? Start the conversation in the comments!
Mark Faggiano is the founder and CEO of TaxJar – A service built to make sales tax compliance simple for eCommerce sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!TaxJar is a service that makes sales tax reporting and filing simple for more than 8,000 online sellers.
Author: Shane Stinemetz
Jiu Jitsu fighter, Sci-Fi lover and Digital Nomad. After becoming an FBA seller, Shane left the tech scene in Silicon Valley to work on Fetcher and travel around the world.