How Your Multichannel Strategy Impacts Sales Tax Compliance

The e-commerce landscape is changing, and e-commerce sales tax compliance is no exception.

Multichannel e-commerce has directly impacted the way consumers purchase products and how businesses get in front of potential customers. Thought leaders and researchers alike have provided incentivizing data for why businesses should adopt a multichannel strategy- from revenue increases, to customer retention, and even the impact it is having on B2B sales. 

With all the positive benefits a multichannel approach can have on a business, it can also create a bigger headache when it comes to sales tax compliance. Increasing your customer base and expanding your reach to new locations can directly impact what is required of the business for managing sales tax. 

A Multichannel Strategy Can Quickly Increase Your Sales Tax Exposure 

Post-Wayfair, companies must now comply with the economic nexus thresholds each state has defined. Most states have their economic nexus threshold set at either 200 orders or $100,000 in sales. Now that you are selling on your own website platforms (i.e. Shopify, BigCommerce), several marketplaces (Amazon, Walmart), and social channels (TikTok, Meta) there is a higher chance that you will exceed the states’ threshold through getting in front of a larger audience. 

Ok, so now what?

Well, it’s important to understand which orders do and don’t count towards a nexus threshold in any particular state. 

The Role of Taxable and Exempt Sales in Sales Tax Compliance

Products and services that are considered to be taxable in one state, can be exempt in another, or even taxed at an alternate/partial rate—and this all affects sales tax compliance. 

The same t-shirt could be both exempt from sales tax if you were to purchase in New York, and could be fully taxable in California. 

Exempt sales can also occur via wholesale or B2B. Although you might be presented with a resale certificate, your sales tax requirements don’t stop there. 31 states count gross sales towards their nexus threshold, so although you may not collect sales tax on the order, you still need to take it into consideration when tracking nexus. 

Sales Tax From Your Website Sales

Now that 46 states and Washington D.C. have economic nexus laws in place, this directly impacts collecting from your customers on your own website. You need to make sure you are collecting the correct amount of sales tax based on the customer’s location and also the taxability of the product or service being sold. 

Then, for orders occuring into states you are not registered for sales tax in, you will want to make sure that you are tracking whether or not you have hit the nexus threshold across multiple channels. 

Sales Tax From Marketplace Sales

Although marketplaces such as Amazon, eBay, TikTok, Meta, and countless others are collecting and remitting sales tax on behalf of their vendors due to the Marketplace Facilitator Laws, those orders can still impact your sales tax requirements. 

27 states count marketplace orders towards their economic nexus threshold, so it’s important to consider how these additional sales can increase your nexus exposure. Keep in mind that you have to report these exempt sales in each state, even if you are not remitting any money connected to these orders.

What Do I Do With All of These Transaction Types? 

It’s important that you have a single version of the truth, aggregating transactions across all platforms. Some merchants leverage their OMS, while others leverage their ERP, backend accounting, or even their sales tax software. 

• Step 1: Determine where to collect. Understand which orders count towards a nexus threshold.

• Step 2: Get registered. Register for a sales tax permit in each state you have hit the threshold in.

• Step 3: Calculate and collect the correct amount of sales tax.

• Step 4: Aggregate into state reports. 

• Step 5: Remit to the state.

Multichannel Sales Tax Compliance Doesn’t Have to be Stressful

Evidently, sales tax compliance is complicated. It gets even more complicated once you factor in multichannel selling. While a multichannel strategy can do wonders for your business, it can start to feel like your sales tax requirements are never-ending. 

Most services only provide sales tax software, which means you still have to follow up and manage it on an ongoing basis. With Zamp’s managed solution, you barely have to lift a finger. Customers are spending as little as 2 minutes per month on sales tax. 

Get in touch with us to learn how we can help—and breathe a sigh of relief. 

About the author

Matt Sprague

Matt Sprague works in revenue for Zamp. He’s worked in the sales tax industry for over 5 years. Matt currently resides on the coast of Maine with his Fiancé, and two Golden Retrievers.