Struggling with sales tax? Meet TaxJar, your new best friend.
Nothing is quite so certain as death and taxes (but mostly taxes).
Per usual, Triumph received no financial compensation from TaxJar for writing this article. Straight from the heart, baby.
Ah, who doesn't love taxes? Well, actually, just about everyone who doesn't actively work for the government (and even some who do). While all new adventurers should—and usually do—strive to be 100% tax compliant, things can be tricky, especially in the beginning. This is particularly true of sales tax, the spooky, ever-present apparition that loves to haunt the retail industry. Even here at Triumph, though it’s far from our main gig, we have to make sure that our merchandise revenue stream stays compliant (and it’s super annoying).
For many, keeping up with different sales tax rules across different states sounds like a full-time job, a job requiring an additional hire that most new ventures can’t afford. When it comes to sales tax, don’t let the fear of making mistakes stop you from pursuing your dream all together. Skip the headache—and get back to focusing on the things you love—with TaxJar.
Economic nexus
Before we get into the thick of TaxJar, we’ll need to briefly lay out some background terms. In the world of sales tax, nothing is quite as important as understanding which states you have an “economic nexus” in. Though it sounds complicated—and frankly a little sci-fi—it’s actually a fairly straightforward concept.
Economic nexus is just a pretentious phrase for “you do a significant amount of business in a particular state.” In other words, if you do enough business, the state is going to want a piece of the action through sales tax.
Now, “significant” is a relative term, but most states define it as either having physical operations in the state (e.g. a physical store or warehouse) or earning over $100,000 in revenue in that state. Keep in mind, these rules change occasionally with new Supreme Court decisions, so incase SCOTUS decides to make this whole first paragraph obsolete with a stroke of the pen, keep up to date on the full list of economic nexus requirements with our good friends at the Sales Tax Institute (they’re great at parties).
State vs. local sales tax
As if the whole economic nexus dynamic wasn't confusing enough, the convolution (if that’s a word) doesn’t stop there. In most states, businesses also have to understand the difference between state and local sales tax. For example, in the state of Georgia, the state sales tax rate is only 4%, but with most counties charging an additional 2-3%, the actual rate sits closer to 7%. This shouldn’t pose too big of an issue if you’re running a brick-and-mortar shop, and, subsequently, your local rate is always the same. However, if you—like most businesses—engage in any sort of e-commerce, you’ll be on the hook for knowing the correct sales tax for every county in the state.
If you fall into this e-commerce category and don’t have an automated sales tax system, Godspeed on your quest. People do it, but they certainly don’t enjoy it. And if you grow large enough to have an economic nexus in multiple states, well, good luck Charlie.
States with no sales tax (hallelujah)
We also wanted to briefly highlight—and applaud—the handful of states that spare adventurers the headache of sales tax. While this won’t absolve you from paying sales tax in other states (per the aforementioned “economic nexus” principle), it’ll certainly make life easier around home base. As of October 2022, the beautiful, beautiful states that do not charge sales tax are as follows:
Oregon: the Beaver State
Montana: the Mountain State
New Hampshire: the Granite State
Delaware: apparently a state
Enter TaxJar
If you aren’t fortunate enough to live in a sales-taxless paradise, and you also don’t covet the opportunity to spend hours calculating sales tax by hand, allow us to introduce your new best friend—TaxJar.
TaxJar is a market leader in automated sales tax compliance. The company is owned by Stripe—one of the world’s top payment processors—so the reasons for TaxJar success and popularity aren’t exactly mysterious. If you already trust Stripe with your payment processing (as most Triumphers do), consider letting their sales tax subsidiary save you an immense amount of time and more than a few headaches.
TaxJar offers a vast menu of services, ranging from the new small business to the Fortune 500 behemoth. While, we certainly believe your new venture can become the latter one day, we are going to focus on the former at the moment—for obvious reasons.
By connecting a TaxJar account to your business, you can automatically ensure sales tax compliance, regardless of changes in the law. TaxJar is powered by a skilled team of in-house tax experts (once again, who we we’re sure are super fun at parties) tasked with constantly reviewing the ever-changing tax codes and updating the platform as the law requires.
So how does this process work?
Once users connect TaxJar to their respective e-commerce platform, they’ll walk through the following steps. Oh, and with dozens of prebuilt plugins for a variety of other software programs, TaxJar makes it as easy as possible to integrate their services to existing e-commerce sites. Kudos, TaxJar.
Once your new venture has registered for a TaxJar account, the first order of business is determining your economic nexus. If you read our paragraph on that from earlier—and didn’t die of boredom—than you’ll already have an idea of what that’s about. Thankfully, TaxJar removes most of the guesswork. Simply tell the program a little bit about the location and nature of your operations, and it will help you determine where you currently have an economic nexus. Fear not, TaxJar also has your back as you grow. The program will automatically keep an eye on your yearly sales per state and notify you if you’re approaching economic nexus in a new state.
Oh, and did we mention that not only will TaxJar help you calculate the correct sales amount, but it’ll also pass the correct charge along to the customer—automatically? Upon, integrating TaxJar with your e-commerce shop, you will immediately gain the option to charge an accurate real-time sales tax fee, either before or during checkout. As sales stack up, TaxJar’s reporting dashboard will help you keep track of all your recent transactions and how much you subsequently owe in tax (gross).
If you’re willing to fork out some extra dough for one of the premium TaxJar subscription plans (more on that in a minute), the program can also automatically file and remit your tax returns for whichever states you require. In other words, if you’re willing to pay a bit more, not only will TaxJar collect sales tax for you, it will also file those tax payments with state governments. If you’d be interesting in paying to ditch the entire sales tax process, these may be the plans for you.
More on that whole premium thing
TaxJar offers two main subscription levels, dubbed Starter and Professional, that both contain several different tier options. Depending on the size of your business and the anticipated complexity of your sales tax filings, you can buy a plan anywhere from the cheapest standard version, at $200 a year, to one of the more expensive Professional versions, at several grand a year. Needless to say, due to the startup nature of most of Triumph’s clients, we advise users to consider the Standard package, and usually the base level plan at that. For only $200 a year, it will still take care of the big things: sales tax calculation and economic nexus tracking. Sure, you adventure will have to file its own sales tax with the state (and please make sure you do!), but this process generally isn’t worth paying several hundred dollars a year to skip—especially if cash is tight early on.
For Squarespace users (like so many of the beautiful Triumphers that read our article here), the deal gets even sweeter. All Squarespace Business Commerce sites receive the base TaxJar subscription plan free of charge. Not only that, TaxJar will also automatically integrate with your site. In just a few clicks, and for a whopping $0, your online store will be all set to start moving product without fear of tax compliance issues. Oh yeah, it’s all coming together.
Any of this sound appealing? Great, then you can go open the TaxJar right here.
Nothing is quite so certain as death and taxes (but mostly taxes)
For years, sales tax has stood as a barrier to entry for many adventurers looking to start their own retail operation. They had the creative gifting, but, sadly, were flummoxed by a convoluted tax system. Thankfully, TaxJar is helping to level the playing field, allowing even the most novel business ventures to come to market. Let TaxJar, and their team of professionals, take the guesswork out of sales tax. Now, back to doing what you actually care about, like making custom scarfs or dog booties—or whatever it is you do.
As always, feel free to Ask Triumph with any additional questions and consider Supporting the Team.
All views expressed in the article are opinions of the author and should not be misconstrued as professional consulting or legal advice. Users are responsible for verifying all information before taking action, and Triumph Group LLC is not responsible for any outcomes. Pursue subjects at your own risk. Seriously, man. It’s your life.
