TaxJar Blog

> If I buy a product from China, are they required to collect sales taxes for Montana? Of course not. So not sure why a business located in a sovereign US state has any obligation to follow laws of some other state in which they don’t operate. Actually the same rules apply to both. See https://blog.taxjar.com/international-sellers-deal-sales-tax-u-s/

> That depends on whether they're rounding, or taking a floor or ceiling :). With proper rounding, it's a wash. Agreed! If they are actually rounding it will be a statistical wash. > Regardless of the rounding method, the fair way is to sum up purchases and compute tax on the total, precisely to minimize the loss of precision on rounding. Again, agreed, this is why we do it this way in the US. > Curiously, as far as I understand the Polish tax code (IANAL), the choice of the method to use is actually given to the vendor! The law recommends[0] that you calculate the tax by multiplying the rate with the total taxable amount, but also allows[1] the seller to choose to calculate per-item tax, and sum that. In both cases, mathematical rounding (half-up) is used[2]. US tax code, at least as far as income taxes go, uses the same rounding method (nearest decimal) however sales tax is can be quite a bit more complicated [1]. Also somewhat related, we quote our fuel prices to 3 decimals. [1] - https://blog.taxjar.com/rounding-issues-sales-tax-returns/

I definitely agree with you that there are better states than California, but I recently moved my online company from California to Texas and discovered a really nasty surprise: Texas considers web hosting, server rental, SaaS, etc. to be services subject to sales tax [1]. Washington actually does as well, since you mentioned it. This will complicate your life in two ways: First, your internet company now has to enumerate subscribers in the same state as you and charge them sales tax. Your competitors, located in friendlier territories, can undercut you by not having to do this. Second, any payments you make to a SaaS/hosting vendor are now subject to use tax. Do you pay AWS for hosting every month? Get ready to cough up ~6% of that for Texas' treasury. If you're running the kind of business where your hosting bill will grow proportionally to your revenue, this amounts to a tax on revenue. In my case, it wildly exceeds anything California ever charged me in income tax. [1] https://blog.taxjar.com/saas-sales-tax/

Specifically on the SaaS front, taxability has been murky and there's not a single standard across the US: https://blog.taxjar.com/saas-sales-tax/

Most states have sales thresholds to hit before you have to worry about dealing with it in their jurisdictions. Here's a decent roundup of when you'll have to start to care: https://blog.taxjar.com/economic-nexus-laws/ Essentially, take care of the tax in the jurisdiction you're in and wait until you're much further along before worrying about other states or territories.

you can check this, https://blog.taxjar.com/saas-sales-tax/ some states do charge sales tax.

Doesn't look true right now, tax jar has an article showing digital services differing in taxation by state. https://blog.taxjar.com/sales-tax-digital-products/

Some states consider SaaS [1] and digital products [2] taxable. Refer to the blog posts below: [1] https://blog.taxjar.com/saas-sales-tax/ [2] https://blog.taxjar.com/sales-tax-digital-products/

This bill doesn't change anything about local sales tax, on internet purchases, other than prohibiting something punative...like where buying something over the internet would incur a tax HIGHER than buying it locally. There is a separate fight going on around local taxes for items bought on the internet. At the moment, an online business is able to charge sales tax only for sales that are shipped to a state that it has a presence in. Amazon, being what it is, has a presence in every US state...so they tack on the appropriate sales tax for wherever you live. And, Amazon is lobbying for legislation that would push every online retailer to do the same, even if they don't have a presence in the shipping destination state. Edit: It's pretty complex: http://blog.taxjar.com/charging-sales-tax-rates/

They currently collect sales tax in 24 states[1,2], and I'm guessing the writing is on the wall in the other 26. I don't know if there's any truth to this Radio Shack rumor, but I'd expect that avoiding tax nexus status probably isn't as big a deal for them as it used to be, because they're going to be forced to do soon, one way or another. [1] http://ilsr.org/rule/states-amazon-sales-tax-map/ [2] http://blog.taxjar.com/michigan-sales-tax-nexus-law/

First thing to note here is that the IRS does not care about what states your offices are in or whether you have a physical presence or not in those states. If the accounting firm told you this, I would seek a second opinion from an individual, but skilled and experienced CPA. The IRS is only concerned with federal taxes. They do not deal with any individual state laws. Second, if it is a pure SaaS product, I am yet to see anyone anywhere in the US charging sales tax. Most states specifically do not tax services which includes SaaS. This article breaks down a few... http://blog.taxjar.com/saas-sales-tax/ You will note that there are some that require taxes and if you have employees in some of those states, you might take a look. Thirdly, as an example, the laws in the state of California state that if a certain percentage of your work force are in the state, then you would need to register and file income taxes in that state. I had a US based SaaS startup with remote employees in multiple and firms were always trying to raise concerns about how we needed to file income tax in every state we did business. It would have been an enormous undertaking and is just not necessary. Lastly, you probably do not have enough presence in the US to be considered having a tax nexus. My unofficial advice is don't worry about it. Accountants are like attorneys in that they are very conservative in the advice they give. No one is going to come after a small company like yours…