In this video, we are going to talk about how your online business should pay its sales tax. Now, sales tax is a state by state thing. It is not a federal government thing. So, what sales tax you pay in California is going to be different and the process is going to be different than, say, in Illinois, or actually any other state.  So, I am going to tell you how we pay sales tax and then, once again, I am not an account or a CPA. I am not anything like that. So, definitely talk to your tax person before you completely take my advice. But this can be a jumping off point. This is how I understand it and this is what we have done in the past.

So, you only pay sales tax in the place that you are located. So, my business is located in Los Angeles, California, so if someone else in California buys something from us, we have to pay California sales tax. Now, if somebody buys something from us and they live in New York and we ship it to New York, we do not have to pay any sales tax on that purchase. So, let’s make the numbers easy, hypothetically we do $1,000,000 in revenue in 2017, for instance. And, of that revenue, $100,000 comes from people in California buying stuff. We would have to pay sales tax on that $100,000.  So we would say – and once again just to make the numbers easy, let’s say there is a 10% sales tax in California. So, we would give the California government $10,000 and say, “Hey, we had $100,000 in sales. Here is $10,000.” Now, your ecommerce store platform should be able to do this for you. Ours does. So, if you have one of the good ones, it should be able to do this.

Now, there are some other little interesting caveats here. We are located in Los Angeles County which has a slightly higher tax rate than the rest of California. So, once again, to make the numbers easy, in our area it is 10% but in the rest of California, it is only 7%. So, we only have to pay that full 10% if someone in L. A. buys something and then we ship it to someone in L. A. County. If we ship something to someone in San Francisco or another place outside of Los Angeles County, we only have to pay 7% tax. I know this is kind of confusing but this is the way L. A. works, it is kind of different. Other states are slightly different on exactly how that works. But, once again, talk to your tax professional. See what advice they have for you. Hopefully this video is a little helpful and is a good jumping off point for that conversation.

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