Record a question for me to answer on the podcast here: speakpipe.com/ambitiousbookkeeper
Resources Mentioned:
TaxJar
Bookkeeping for E-Commerce Workshop
Sales Tax Workshop
Learn how to start your bookkeeping business (for experienced bookkeepers & accountants): https://www.ambitiousbookkeeper.com/bba
Become a Bookkeeper: https://www.katieferro.com/a/38894/2PQNgtvv (affiliate link)
Grab the FREE Start your Bookkeeping Biz Checklist: https://www.ambitiousbookkeeper.com/checklist
Grab my FREE New Client Onboarding Templates: https://www.ambitiousbookkeeper.com/onboard
Become a Client: ofcoursebookkeeping.com/contact
Visit our website: ambitiousbookkeeper.com
Follow the Blog: ambitiousbookkeeper.com/blog
Connect on Instagram: instagram.com/ambitiousbookkeeper
Connect on LinkedIn: Linkedin.com/in/SerenaShoup
Connect on Facebook: Facebook.com/serenashoupcpa
Podcast Publishing Tools we use:
Click here to get the free First 100 Leads Training with James Wedmore >>
Record a question for me to answer on the podcast here: speakpipe.com/ambitiousbookkeeper
Resources Mentioned:
TaxJar
Bookkeeping for E-Commerce Workshop
Sales Tax Workshop
Learn how to start your bookkeeping business (for experienced bookkeepers & accountants): https://www.ambitiousbookkeeper.com/bba
Become a Bookkeeper: https://www.katieferro.com/a/38894/2PQNgtvv (affiliate link)
Grab the FREE Start your Bookkeeping Biz Checklist: https://www.ambitiousbookkeeper.com/checklist
Grab my FREE New Client Onboarding Templates: https://www.ambitiousbookkeeper.com/onboard
Become a Client: ofcoursebookkeeping.com/contact
Visit our website: ambitiousbookkeeper.com
Follow the Blog: ambitiousbookkeeper.com/blog
Connect on Instagram: instagram.com/ambitiousbookkeeper
Connect on LinkedIn: Linkedin.com/in/SerenaShoup
Connect on Facebook: Facebook.com/serenashoupcpa
Podcast Publishing Tools we use:
Click here to get the free First 100 Leads Training with James Wedmore >>
Welcome back to the ambitious bookkeeper podcast this is a another mini-sode and today I'm going to be talking about sales tax automation for e-commerce businesses I have an audience question one of my fellow bookkeepers has asked One of my fellow bookkeepers has taken a lot of my courses including the sales tax and e-commerce courses and I will link to those below or in the show notes she says I'm working with more e-commerce clients and have had a few questions. I was curious if you had a sales tax tracking and filing software preference or recommendation and do you mainly use Avalara tax jar Quaderno Or another or some combination of these do you automate the filings with any of those or do you use them for tracking and then file the returns yourself? and do you do the state registrations yourself? I have a client that is hitting thresholds in multiple states many of them are streamlined sales tax states which I'll get to in a moment And I want to get the system set up well from the beginning thank you for all that you do and any guidance you can provide well thank you so much for submitting your question this is a really good one I get a lot of questions about sales tax and e-commerce so let's jump in your first question was do I have a sales tax tracking and filing software preference or recommendation? And the answer is yes for our clients we use tax jar and that is mainly because most of our clients that are on e-commerce are also on Shopify and we are able to integrate tax jar with Shopify so things are calculated correctly it also is important to understand what level of Shopify your clients are on so that you can make sure all the settings in the tax settings are set up correctly and also that things are being pushed over to tax jar as well so it depends on the level of Shopify they're on weather it's actually directly integrated with tax jar and tax jar is calculating the sales tax in the shop at the checkout or if you are setting up the tax rates in Shopify and then that information is being pushed over to tax jar and then filed so it's important for you to understand your specific workflows with your clients? they all might be a little bit different but what we do is we set up our clients on tax jar most of our clients are on a version of Shopify where we actually have to go into the tax settings and set up any time they hit a threshold in a certain jurisdiction we have to turn that on for collecting sales tax and all that good stuff and then it pushes everything it's integrated with tax jar so the information is sent over to tax jar and we try to make sure that every state is set up on auto file within tax jar so we will actually to answer one of your other questions we actually set up the sales tax registrations for our clients we don't pay for someone else to do it or anything we handle it ourselves that way we have control of all the logins and all the setups and we share the login information with clients every state is a little bit different some states allow you to have an accountant log in some states don't so we just try to keep really good track of all the logins we use one password for that and we share all of the information with our clients so that they have access to those things and if we ever part ways a couple of our clients we will have to go into the state websites and change log-in information or at least share it with the client and let them change it that might be a little bit of work to do but that is how we do handle that we handle this the registrations ourselves I will say a couple of years ago actually it's probably been like three or four years by now we brought on an e-commerce client that we still have and we had done a big sales tax analysis for them and they had already hit thresholds in multiple states I want to say maybe eight states by that time and hadn't set up sales tax yet so what we did is for the states that were part of the streamlined sales tax thing I don't know what to call that? we did use that to set up those states and then each other individual state that wasn't part of the streamlined sales tax thing we actually set up manually however The streamline sales tax website is a little clunky and what ended up happening is half of the states that we tried to set up through that never actually went through and so we had to go back to those states and manually set them up ourselves months later what we are we're just waiting for them to be set up and so I would actually recommend not using the streamlined sales tax a website to do those setups I would just go directly to each individual state because what happens is even the ones that were able to be set up they each state handles things differently some states send you a letter in the mail so that letter would go to the client and then we didn't find out about it so then we had to contact the state and get a new one sent and then some of the states you still have to go set up login with that state outside of the streamlined sales tax system and so when you put in that effort it's like I may as well have just set up the sales tax on my own directly with the state so that would be my recommendation on that don't try to use the streamlined sales tax system for some reason we were just not successful with it I would just go directly to each state individually and then you know exactly you have the confirmation that it has been set up and you have the login right away and you can manage all of that yourself that is my recommendation the last question you have in here is do you automate the filings with any of those or do you use them for tracking and then file the returns yourself? So like I said before we try to set up every state on auto file with tax jar it does cost extra money it is worth the extra money to not have to do the filing yourself but the one thing I will say is occasionally you might run into issues with setting up the auto file I do have one state on that one big e-commerce client that we have where it is a monthly item for me to go in run the tax jar report and then go to the state website and file and pay it but it takes like 15 minutes so not a huge deal I wouldn't want to do that for all the states since it's one state it's not a big deal but the other piece of that that I will say is it is really important for you to have a quarterly process where you go in to the balance sheet and you reconcile the sales tax liability account because you can't really do this monthly because some states are going to be on a quarterly filing frequency so I recommend doing this at the end of each quarter where you look at all of the payments that came out for that quarter end whether it's a monthly payment or a quarter payment and reconcile it to what that quarter end balance is in the sales tax liability account because it's never going to be exact and you need to make adjustments so say you have five states that you are filing in maybe two of them are monthly filing and three of them are quarterly filings so at the end of Q1 Or we're at the end of the year so we're just going to say in January we're going to look at the balance as of December 31st we're going to after tax jar has filed all of the filings for Q4 we're going to pull all of those reports from tax jar of all the filings that they made and what they remitted to the states we are going to add all of those up and then we're going to look at the sales tax liability account in Xero or QuickBooks or whatever software you're using with that client and there's going to be a difference a hundred percent across the board there's always going to be a difference because sometimes tax jar collects something different than or says you needed to collect something different and they remit something different than what was actually collected and booked onto your GL and this is also where you're going to find breaks in your workflow or integrations and so it's really important to do this level of work so you're going to look at the sales tax liability balance at the end of the year you're going to see maybe on the GL in zero or in QuickBooks it's $1500 but all of the payments that were remitted to the states for the end of the year for December amount to $1600 so you've actually remitted more than what was on the books so you're going to adjust the balance sheet and book the difference to an expense account and so we have created a sales tax expense account for our client because that's the difference and then if it's a large difference we have set up a threshold internally for this client where if it's under a hundred dollars difference for The quarter end or whatever you decide it is we don't dig into it we just adjust it to the expense if there is a large difference every time and it wasn't like you set up a new state and you had some back taxes to pay or anything like that then you need to look at your systems and make sure that something's not broken and that your Shopify or wherever you're collecting the sales tax on the front end is actually calculating appropriately and so that's what reconciling that account will help you do so we kind of went into a sales tax lesson here but I hope this was helpful if you have any questions we actually have something that you can record your own question for the podcast and how they answered either in a mini-sode or on a regular podcast if it ends up as a longer episode if you go to speakpipe.com/ambitiousbookkeeper you can record your own question and I will answer it on air for you I hope that you found this episode helpful I will link to resources in the show notes or below where you're watching this video of you're watching it on YouTube and if you're not watching this on YouTube go over to YouTube and subscribe and you'll get these minisodes in your YouTube platform talk to you soon