Achieving something new and big in business is really exciting. And if you are growing in your niche, then it’s not only the new technologies that you may want to know about, but also there’s a lot to keep in mind like Magento tax rates and sales tax implications.
While you are busy taking care of the growth, we’d like to help you better understand the potential sales tax implications of your business expanding.
New Products to Inventory
Planning to add a new range of products in the existing inventory? Keep in mind that there may be different taxes applicable for new products and that updating products may change taxability rules.
For example, you may be involved in selling software in a packaged form like in compact discs. And now you are planning to sell software as a digital downloads. Tax rates may be different than what you paid earlier. Check for the differences and update the tax reporting software on time. The tax rules are likely to change according to products sold and the state you are located in. In one state digital download products may be taxable while in other state they may come under the lowest tax rate, or may be taxed at a different rate.
Magento Tax Rates: Choosing New Sales Channels
You may be a brick-and-mortar store that goes online or vice versa to increase market visibility. Opting for a new sales channel can grow your sales, but it also leads to different sales tax rates. Selling into new states may create nexus for you in those states. So, if you are an online store setting up your first physical store, consider the sales tax effect when someone returns an online order in the store. Early planning can help minimize tax missteps from the outset. It can also help minimize tax missteps from the outset.
Business Expansion Efforts
Before trying something new to expand your business, it is important to conduct regular nexus studies. Also, check how trying something new can affect Magento sales rates.
For example, you visit New Jersey to attend a trade show and launch advertising programs in New Jersey and New York. If you sell anything through the trade show, then you will automatically create nexus in New Jersey. You must then collect taxes from the local people, that also includes online sales. If your online ads bring you sales, you’re further expanding your nexus into the New York as well. Remember that you have already created a nexus with the trade show sales.
As your company grows, you grow the number of jurisdictions you must collect tax in. For example, you plan to expand your business in America. You strike up a deal with a fulfillment center or a drop shipper. A fulfillment center will deal with packaging and shipping while the later would drop packages at the delivery location. Both can create new sales tax obligations for you.
If you have a store inventory in U.S., even though a third party, you typically have nexus in that state.
Remember, every new activity or program you implement to your business may create a new nexus for you. These activities can have a great positive impact on your bottom line, but it’s important to understand how they affect your tax obligations. If you fail to understand how it affects taxes, the negative impact can be staggering.