Should eCommerce Sellers Cancel State Sales Tax Accounts?
Is now the time to start canceling state sales tax accounts? After all, Amazon and other marketplaces are collecting sales tax for their sellers in 39 states. The answer is …complicated.
First, here is a list of states requiring marketplace facilitators to collect sales tax on behalf of their third-party sellers. Review this list then understand five facts before canceling any state sales tax permits. Five Facts about Closing State Sales Tax Accounts
FACT 1: If you are only selling on Amazon or any other marketplace, most of the states will allow you to close your sales tax account and no longer report.
FACT 2: If you are selling on any other platform, such as your own website using Shopify, you will still need to be registered in order to collect.
FACT 3: When you have nexus in a state, it transcends over all platforms, not just the platform that gave you nexus. For example, if you are selling on Amazon and have physical nexus in a state due to storing inventory, you have nexus for your Shopify website too.
FACT 4: Four states require sellers to maintain their sales tax permits, even if you are only selling on Amazon and they are collecting all of the sales tax.
FACT 5: Six states require registration if you have economic or physical nexus in the state, even if Amazon is remitting all of the tax.
Now for the Drum Role
Potentially, you may be able to cancel your sales tax account in up to 28 states. Before making any registration changes, be sure to understand the facts listed above. Revoking registrations in the wrong states can lead to owing past due sales tax plus penalties and interest charges
How to Cancel a Sales Tax Permit?
Every state has a different method for canceling sales tax permits. Some states accept cancellations via phone calls. Other states require online cancellations. A few states still require hard-copy cancellation forms.
The best method for cancellation is to contact your sales tax advisor for help with closing accounts. Don’t forget that if you have any sales tax that has been collected and not remitted, you will need to file the final returns prior to closing the accounts.
In a world where marketplaces will be collecting sales tax on most orders, it is important to know what to do with the accounts that you held prior to state’s adopting marketplace facilitator requirements. If you have questions, contact a Cherry Bekaert sales tax expert for eCommerce by completing this request.