To survive the pandemic, many brick and mortar shops have added or have switched to online selling only. That has come with many new hurdles to jump, including dealing with sales tax in a whole new way.
The pandemic has impacted every part of our personal and professional lives, there is no doubt about that. Many local restaurants and businesses right here in the Lowcountry have sadly had to close their doors due to lack of sales through the shutdown and the slow resurgence of opening back up. One of the many challenges businesses have had to face, to keep their doors open and to survive, is switching from brick and mortar sales to adding online sales or going to online-only sales. Restaurants who have never done takeout or delivery have added those options to their customer, and have had some serious adjustments to make.
For these companies who have decided to move online, they were facing more than just learning how to run their business online and how to promote themselves on this new platform. They are now adapting to a change in sales tax. Thankfully, here in South Carolina, this isn't a huge shock as the state already collects sales tax from most online retailers. Since 2018, a new ruling was made that said each state can make online shoppers pay for sales tax, even if they aren't buying products from their home state. Those who went into the pandemic with this knowledge and were successfully working online had already planned for this. Making the transition to an online business and adding on this extra layer can be difficult. This new ruling decided even if a business didn't have a physical presence in the state they were selling to, they now have to collect taxes from any state that has given the company more than 200 sales transactions or if the company made $100,000 in sales within a particular state.
What makes matters worse is that not every state or jurisdiction of states has the same guidelines when it comes to this ruling. A business here in SC might get a ton of orders from Florida or Texas, but each state will come with its own set of stipulations when it comes to collecting sales tax. The company in question is then responsible for collecting both percentages of sales tax and for reporting them correctly. It's a lot to know and understand. For a company to be successful in this and to not get stuck owing tons of money in back taxes, is to understand and know what each jurisdiction's guidelines are. What else can be helpful is to have someone on staff or working with a company like ours that knows and understands how to deal with each particular state that you are selling your product to.
How does this affect your business beyond just your taxes? You need to look at your product and how you track your sales and how you keep up with your bookkeeping. Can you keep track of all your sales to every state? It's not just where you're selling to, this is also affected if you're storing your products outside of your state or not. Remember, just like any tax law or rulings, they can change and fluctuate often and you need to stay on top of these changes.
In any big transition that a company goes through like this situation, working with us at Pathways can make it a much less painful experience. We understand these tax rulings and know when they change and fluctuate. Once you've made the decision to move your business online and you understand each jurisdiction's sales tax, you will need to register through your state to become compliant. If you are a business new to online sales or would like to build your online presence, don't stress too much. With the world as it is, the trend for online shopping is predicted to only become more popular. Even more so than it is now. It will be a challenge to make this transition, but it will be worth it. Your clientele will appreciate it, and so will your bank account. Don't forget! If you're looking for the best tax accountant in Summerville, the best tax services in Summerville, the best Quickbooks services in Summerville, and the best payroll services in Summerville, we are still here for you. Tax season may be over for some and just starting for others, and we will be here for you no matter what!
The Pathways Team