Since the start of the internet boom in the ’90s, the eCommerce industry has managed to avoid charging a sales tax. Attempting to regulate a state-by-state sales tax on something as vast and abstract as the internet seemed like a difficult task for an industry that wasn’t making much of an impact yet. Fast forward two decades and eCommerce now dominates the market, making shopping malls and big-box stores seem like relics from the past.
According to Forbes, eCommerce sales reached $454 billion across the industry in 2017. In the early days of the internet, when less than 2 percent of households in this country owned a computer, it seemed plausible to not require a sales tax on goods sold online.
Now that the eCommerce industry has become so fundamental to daily life, the government determined that it was high time to implement a sales tax. As an online business owner, here’s what you need to know about how the current legislation and how it will affect your eCommerce business.
Be Prepared to Adjust Prices for Additional Tax
Though many major eCommerce retailers have expressed optimism that the sales tax will not impact their business, it could have more of an effect on small-to-midsize businesses (SMBs). In fact, many analysts predict that SMBs will feel the impact of the recent change. Before this ruling, eCommerce businesses had a powerful advantage over brick-and-mortar stores because of the lack of sales tax.
Online stores have been able to offer lower prices without needing to incorporate that additional cost to cover a sales tax. With the newest regulations in place, it may be necessary to alter your prices to compensate for the extra expense.
Find a Reputable Accounting Service to Help
Most times, SMBs do not have the resources that larger eCommerce operations have. The big-box retailers are able to hire accounting teams with eCommerce experience, who can help navigate the new law. If you’re selling to consumers across the country, it can be time-consuming and frustrating to figure out the sales tax on every individual sale across all states without an expert to guide you.
Luckily, there are reputable tax management companies who can help you sort through your tax needs and make this new transition as smooth as possible, while ensuring that you’re in compliance with the law.
Different States May Enforce Different Requirements
Now that the Supreme Court has ruled in favor of sales tax on eCommerce businesses, it will be left up to each individual state to construct the exact perimeters for its taxes. Currently, 45 states and the District of Columbia enforce a sales tax for online stores. In the case of Wayfair v. South Dakota, the state decided that an eCommerce company’s volume would determine whether or not it had to pay the sales tax.
Any business that sells under $100,000 worth of merchandise per year is exempt from the sales tax. However, with so many varying stipulations across the states, it means that small eCommerce companies need to pay particularly close attention to the law and be sure to comply with each state’s rules to avoid any tax issues in the future.
What Should You Do as a Small Business Owner?
The first step as an eCommerce business owner is to stay in the know. Make sure that you are continuing to read about the decision and staying informed when other states begin writing their tax laws to stay ahead of the curve. Be ready to make changes to your marketing strategies, prices and other general business tactics, so when the changes come, you’ll be prepared instead of trying to play catch-up.
If you’re interested in learning more about the new sales tax decision, contact Springbot and we’d be happy to discuss how your marketing strategy may be affected. You can also inquire about this legislative change with TaxJar to help you identify the steps your business will need to take next.
Springbot provides advanced eCommerce marketing technology for small to medium-sized retailers. We make the overwhelming task of running and tracking multi-channel marketing campaigns ridiculously simple, from email and social marketing, to online ads, Amazon Marketplace and more. The key is Springbot’s integration with BigCommerce, Magento and Shopify to deliver the power of data management, marketing automation and analytics. We then take that information and make data-driven marketing recommendations specially tailored towards needs.