If you operate an eCommerce business, it’s important to have a clear understanding of how sales tax works. After all, failing to collect the proper amount of sales tax can result in hefty fines from the IRS. In this blog post, we’ll give you a brief overview of sales tax in the United States and Canada so that you can be sure you’re complying with the law.
In the United States, the rules for collecting sales tax vary from state to state. You are required to collect sales tax on behalf of the state in which your customer resides. So, if you sell a product to a customer in California, you would need to collect California’s state sales tax rate of 7.25%. You would then remit that taxes collected to the state of California.
The good news is that there are many software solutions available that can help you automate the sales tax collection process. Avalara is one such solution; it integrates with popular eCommerce platforms like Shopify, Magento, and WooCommerce to help businesses manage their sales tax obligations with ease.
In Canada, provincial and federal taxes are both levied on most goods and services. The federal GST (Goods and Services Tax) rate is 5%, while provincial rates vary from province to province; for example, the PST (Provincial Sales Tax) rate in Ontario is 8%. As a Canadian eCommerce business owner, it’s your responsibility to collect both the federal GST and the appropriate provincial taxes from your customers and remit them to the proper authorities. Again, there are many software solutions available that can help with this; Moneris is one option worth considering.
As an eCommerce business owner, it’s important to have a clear understanding of how sales tax works in the United States and Canada. Failing to collect the proper amount of sales tax can result in hefty fines from the IRS or CRA. There are many software solutions available that can help you automate the sales tax collection process; Avalara and Moneris are two worth considering. By taking measures to ensure compliance with US and Canadian sales tax laws, you can avoid costly penalties and keep your business running smoothly.
