Welcome to YourMarketingPodcast. This is Series One – How to Start a Successful eCommerce Business in Less than 30 Days. In this step-by-step guide, you will learn how to quickly launch an eCommerce store and start seeing those sales roll in! And here’s your host…Ishani DePillo.

I’m totally diggin’ the title of today’s podcast – “Taxes, Returns, Promotions, Oh My!” Because just like Dorothy and her crew, we were quite terrified of these scary monsters lurking in the forest. We knew they existed, we knew they would catch up to us soon, and we had little to no idea on how to combat the beast or more like, soothe the beast.  

So we’re going to cover what we learned, messily, haphazardly, so you can have a much smoother yellow brick road experience. But FULL DISCLOSURE: we are not accountants. It’s best to consult your accountant and ask for their professional advice and stick with that. And if you get good advice, don’t be selfish now, pass it on to us too!

Before we dive into taxes, I just wanted to quickly go over our last episode which covered all about Operations, like shipping, Customer Service, and more. Don’t overlook Operations because you want to be extremely prepared when orders start coming in.

Okay lions, I mean, taxes, let’s do this.

By the way, Sales tax has never had a more accurate depiction – big messy mane, sharp teeth to swallow you whole, and claws to take that money right out of your hands. Hm, I guess you can get a pretty good idea on how I feel about taxes. And I’ve got an inkling that you’re probably right there with me or will be after your first year in business.

Running an eCommerce store that sells tangible personal property means you have to collect Sales taxes. A tangible personal property is defined as any item that can be seen, weighed, measured, felt, or touched. Gift cards might be the only item that’s exempted from sales tax in your Store.

A sales tax is a tax paid to a governing body for the sales of certain goods and services, and it’s made up of your State tax + your local tax. So for instance, if you operate in Orange County, California, like we do, your sales tax is 7.25% (6% state tax + 1.25% local tax). This tax is collected from your buyers at the time of purchase and then you are liable to pass it over to the governing body during your tax schedule. Although the consumer carries the burden of paying the sales tax, you are liable for collecting and passing the sales taxes to the governing body.

For eCommerce, oy vey, it gets complicated. Not only does every State have different Sales Tax requirements and percentages collected, but you have to care if you have Nexus in these States. Nexus, you’re going to hate this word. Sales tax nexus is the relationship between you, the seller, and the state, that mandates that you have to register than collect and remit sales tax in that state. Usually this is because you have a physical presence in the state or you reach a certain sales threshold, like over $100k in annual sales. Let’s demonstrate this in an example:

You’re located in California and your home address is listed as the company’s address; it’s also where you house all your product. In this case, you have a Nexus in California and therefore have to pay California State Sales tax.

Now, let’s say you ship 50% of your goods to a friend on the East Coast in Maryland to send out items from her home to fulfill East Coast orders. Maryland will want a piece of that pie too, because you have a Nexus in that State. You just created a physical presence, or a fulfillment center, in the state and should therefore probably collect Sales taxes in case the State requests it. If you don’t collect sales tax from the consumer, you are still responsible to pay, so then you have to pay out of your bottom line.

Let’s add one more piece, just to make it even more messy – District taxes. A district tax can be anywhere between .10% t