Charging online taxes when filling orders is a special concern for businesses that sell products through the internet. Knowing when to charge a customer sales tax and how much is important to their business. Not only can these tax charges help a business pay their own taxes, but quite often, it’s required by law that you charge them in order to return the taxes to the government.
So, how do you know if your business qualifies for charging clients online taxes? This is actually very easy. If your business has a physical presence in the same state as the individual who is buying from you, they will need to pay whatever the sales tax is for that particular state. For example, if your business warehouse is in California, and your client is from California, they will be required to pay a sales tax.
But if the client isn’t from California, they are not required to pay sales taxes. However, this process is likely to change as the growth of online sales increases and more and more money is made from online businesses. The government isn’t quite able to get all the money that is being made from online buyers at this point, but they are looking for ways to begin to tap the online retailers for a portion of their earnings.
That said, if you have bought products online and you have not been charged sales tax on them, even though you were supposed to, the IRS can still come after you to get this full sales tax amount. While this is not happening often, if you are a large business that is buying products for your business online and then not paying sales taxes, you might be getting a note from the IRS in the future, in regards to the fact that you have not payed what you owe in online taxes.
If you’re not sure what category you fall into when it comes to online taxes, you might want to keep track of receipts of purchases that might require sales tax to be paid in the future, just in case. That way, you will know whether or not the estimate the IRS is giving you is right and be sure of how much you are being taxed is correct.
Charging online taxes is also tricky because you need to make sure that the person who is ordering from you is actually in the location where they say they are. To do this, you may want to make identification verification system, just as you would do with the credit card verification and authorization. Be sure that the credit card and the billing address are correct and that you are shipping ONLY to the billing address, unless it’s noted as a gift.
Steps are being created to make sure that the government is getting a piece of what businesses are profiting online. Be sure that you are paying the right amount in sales tax to eliminate any problems with the government in the future as they develop ways of making sure you are paying online taxes.
Craig Chambers is a tax and financial planner who enjoys sharing tips on online taxes and offers extensive free tax guides, and a free “special report” on taxes. Plus you can download the author’s new tax guide handbook on his website taxesandtax.com