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Examples for Understanding Sales Tax for Small Businesses


Here at Walker Bookkeeping Online, we know that understanding how sales tax works is essential when it comes to selling products online. In this post, we'll explore the fundamentals of sales tax for small businesses selling merch and restaurants selling prepared food & bevvies.

Part 1: Sales Tax for Small Businesses Selling Retail Merchandise Online

When selling retail merchandise online, small businesses must be aware of their sales tax obligations. Sales tax is a consumption-based tax imposed by state and local governments on the sale of tangible goods within their jurisdiction. Each state has its own set of rules and tax rates, which can be complex for small businesses to navigate.


Let's consider a small online boutique based in Arizona that sells clothing and accessories to customers across the United States. Suppose a customer from New York purchases a dress from the boutique's website. In this case, the boutique is required to charge New York state sales tax at the rate applicable in the customer's location.

Enter the Wayfair Ruling:

In 2018, the Supreme Court's landmark decision in South Dakota v. Wayfair, Inc. changed the landscape of online sales tax. The ruling expanded the states' authority to require out-of-state sellers to collect and remit sales tax, even if they don't have a physical presence (e.g., a store or warehouse) in that state. This means that small businesses selling online may now have sales tax obligations in multiple states, depending on their sales volume and transactions.

Part 2: Sales Tax for Restaurants Selling Food and Beverages Online

Restaurants selling food and beverages online also have specific sales tax considerations. In most states, prepared food and beverages are subject to sales tax, whether they are sold in-person or through online ordering platforms.


Imagine a small family-owned restaurant in Texas that offers online ordering and delivery services. When a customer places an order for a meal through their website or a food delivery app, the restaurant must charge Texas state sales tax on the transaction.


Small businesses must be diligent in determining the appropriate sales tax rates and complying with the regulations of each state where they conduct business. The Wayfair ruling has brought significant changes to the landscape of online sales tax, and it's essential for businesses to stay up-to-date with their tax obligations to avoid potential penalties.

Remember that sales tax laws can be complex, and it's always a good idea to consult with a tax professional or accountant for personalized advice and guidance.

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