If you charge Canadian sales tax (GST/HST) to your current customers, you may think that while another sales tax isn’t what you need on your plate right now, it can’t be that difficult...
Unfortunately, the US sales tax system is far more complicated than its Canadian counterpart with ever-changing laws, heftier fines for non-compliance and state-specific rules. That said, here’s a high-level overview of what you need to do in order to register and pay your US sales tax:
Assuming you have nexus in a state, now what?
Once you determine that you have nexus and your product is taxable in a particular state, you’ll need to get a permit to collect and remit sales tax. To get a permit, you’ll first need to register your business with a US EIN (Employer Identification Number) which you can do via the IRS or an external service provider. With your EIN you’ll then need to complete the individual registration forms which can vary per state.
Much like Canadian GST/HST, US sales tax is collected from the customer then paid to the tax authorities. However, unlike GST/HST whose rates differ by province, US sales tax differs by region or municipality and so one state could have many different (and changing) sales tax rates depending on the location of the customer within that state. For that reason, most businesses should use US sales tax software to calculate the appropriate rate depending on the billing address of the customer.
Assuming you’ve correctly collected your US sales tax from your customers, you’ll need to complete your sales tax filings and submit the payment to each state in which you’ve registered. Most states require an ACH transfer and you’ll likely need a US bank account to facilitate the payment of your taxes. Keep in mind that sales tax returns need to be prepared, filed and paid either monthly, quarterly or annually depending on a number of factors so chances are you’ll be filing a whole bunch of returns throughout the year.
Given the complexity of the US sales tax landscape, you may be better off using an external US sales tax management service so make sure to check out your options before navigating the process on your own.
Thanks to our friends at TaxValet who helped us with this post. They're a great resource to check out if you're curious about US sales tax.