When you run a business, sales tax will always be present. As owners, you are responsible for collecting and filing sales tax to the proper tax collection agency. If you're new to Amazon or any ecommerce business for that matter, it's understandable to get confused about how taxes work.
Sales tax compliance is a must for every business, so we're here to help you make sense of tax reports and everything that surrounds it. We'll also introduce accounting software to help with your financial management. So don't forget to take notes so you can be confident in handling your business’s taxes.
What is Amazon Sales Tax?
Sales tax is a percentage of every completed sale that Amazon collects and later on remits to the government. Almost all kinds of products are levied with sales tax, which may vary depending on what category your product falls under or which sales tax nexus you belong in.
Fortunately, Amazon offers a service that automatically collects sales tax for your business. However, it is up to you to ensure that all the information is accurate. You must input the correct sales tax rates so the platform can collect them accordingly.
Amazon Sales Tax Compliance in 3 Easy Steps
Tax obligations should not be intimidating when you know what to do. Collecting sales tax can be easy if you follow these three essential steps.
Secure Sales Tax Permit
Before you can collect sales tax, you have to secure a permit. Without a permit, sales tax collection is illegal. You can find forms on your local revenue website and register your business. Once you complete your registration, the tax collection agency will give your filing frequency. It can be monthly, quarterly, or annually depending on the volume of sales your business makes in a certain period.
Sales Tax Collection
After securing the permit, you can now legally collect sales tax. Amazon has a tax collection system that will handle collection for you once you input the correct settings. Tax charges may depend if the product sales are origin-based or destination-based.
Origin-based tax calculations means that you follow the tax rate of where your business is located. In comparison, destination-based calculations will consider the tax rate of where your products are going, regardless of where you are located.
Filing Sales Tax
Tax collection authorities will usually ask for sales tax reports and other business statements when you file for sales tax returns. You can easily find different reports in your Amazon Seller Central account. If you want comprehensive reports, you use accounting software to generate more detailed ones for your business.
In addition, make sure that all the data in your tax returns are valid to avoid any issues and penalties.
QuickBooks for Amazon Accounting
Fortunately for business owners, accounting is not as dreadful as it sounds. There's professional help and accounting software available for your business. When it comes to accounting software, you can integrate QuickBooks with Amazon, which makes it the best choice for the platform and its sellers.
Let's take a look at the different functions QuickBooks can do for your Amazon business.
Profit and Expense Tracking
Tracking cash flow is essential for every business. It can indicate if you are earning a profit or are operating on a loss. QuickBooks allows you to connect different payment channels and bank accounts to your software to instantly record all the money that goes in and out of your business.
In order to make transactions easier to track, you can personalize and create categories for your business spending. The software can also calculate your probable profits and expenses based on the cash flow input you have in your software.
Sales Tax Reporting and Calculation
QuickBooks automatically tracks and calculates sales tax for your business. Everything is automated for you, so when the filing period comes, all you need to do is generate the report, and you’ll be good to go. In addition, you’re assured that all the data generated from the software is valid and accurate.
This feature will save you hours from manual calculations of your sales tax, and you can ensure that you'll never miss a deadline for filing sales tax returns.
Multi-Currency Support
Online sellers on Amazon have a high chance of getting international customers. QuickBooks has multi-currency support so you can easily track money from your international sales. Moreover, it also calculates the appropriate tax rates for whichever country the order comes from, so you won’t have to worry about tax compliance.
Instant Business Reporting
Accurate financial reports lead to better decision making, and QuickBooks generates all the reports you need for your business. You can generate financial statements such as sales tax reports, balance sheets, profit and loss statements, business expense statements, income statements, and many more.
You can customize the reports for monthly, quarterly, or annual summaries, depending on your preferences.
Compatible With Amazon
Amazon and QuickBooks are a good combination because you can integrate the software with the platform. Once you connect the software to your Amazon seller account, it automatically imports all the data you have to the software. This action will save you time versus having to manually transfer all your financial data.
Furthermore, QuickBooks has top-notch security to ensure all the data in the software is protected. QuickBooks has password-protected logins, server firewalls, and a 24/7 activity tracker, so you can keep watch over all the actions that happen in your software.
Mobile Application
QuickBooks is also available on mobile so that you can keep track of your business finances anywhere. The best feature of the mobile version is that it can take shots of your business receipts, upload them, and record them as expenses. This feature makes business expense tracking more convenient.
Furthermore, you can access business insights from your mobile dashboard in real time. With the app, you can do accounting anytime and anywhere.
Final Thoughts
Whether you have a physical store or an ecommerce business, collecting sales tax is a part of running it. As business owners, you should be familiar with the different processes that involve your business’s sales tax. We hope this quick overview of Amazon sales tax helps you with your taxation needs.
Furthermore, if you need professional help with your business finances, Unloop provides services for ecommerce business owners like you. Our services include bookkeeping, sales tax, income tax, payroll, and forecasting. Talk to our experts and work with us today!