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How do I know if I need to collect sales tax in other states?

The rules changed in 2018. Before that, you only had to collect sales tax in states where you had a physical presence like a store, warehouse, or employee. The Supreme Court’s Wayfair decision changed everything. Now states can require you to collect sales tax based purely on how much you sell to their residents.

This is called economic nexus. Each state sets its own threshold. Most use $100,000 in sales or 200 separate transactions in a calendar year, whichever you hit first. Some states only look at dollar amounts. The numbers vary, so you need to check each state where you’re making sales.

A few situations commonly trigger out-of-state sales tax obligations. Selling on Amazon is a big one, especially if you use Fulfilled by Amazon. Your inventory sitting in Amazon warehouses across the country creates physical nexus in those states regardless of your sales volume there. Selling through Shopify, Etsy, or your own website to customers nationwide can push you over economic thresholds in multiple states at once. Having employees or independent contractors working remotely from other states can create nexus. Even attending trade shows where you take orders sometimes counts.

Track your sales by state throughout the year. Most accounting and e-commerce platforms can generate reports showing where your customers are located. When you approach a state’s threshold, you need to register to collect sales tax there before you cross it. Waiting until after creates back-tax liability and potential penalties.

This gets complicated fast. Managing registration, collection rates, filing schedules, and remittance across multiple states is a real administrative burden. Different states have different rates, different product taxability rules, and different filing frequencies. Most small businesses that hit this point use automation software like TaxJar or Avalara to handle calculations and filings.

If you think you might have nexus in other states and haven’t been collecting, don’t ignore it. Most states offer voluntary disclosure agreements that let you come into compliance with reduced penalties. The longer you wait, the more exposure you build up.

Virginia-based businesses selling locally don’t usually need to worry about this. But if you’re shipping products across the country or selling online, it’s worth running the numbers. A Tri-Cities bookkeeper who understands multi-state sales tax can help you figure out where you have obligations and set up systems to stay compliant before it becomes a problem.

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More Questions

Can I be held personally liable for unpaid sales tax?

Yes, even if you operate as an LLC or corporation. Sales tax is trust fund money that you collect for the state, and if you don't remit it, Virginia can pursue you personally.

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How often do I need to file sales tax returns?

Your state determines filing frequency based on how much sales tax you collect. Virginia requires monthly filing if your liability exceeds $4,000 per month, quarterly for lower volumes, and annual filing for very small amounts.

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Do I need to collect sales tax if I sell online?

If you sell enough online, you probably do. Most states require sales tax collection once you hit certain revenue or transaction thresholds in that state. The rules changed significantly after a 2018 Supreme Court decision.

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How long should I keep business receipts and invoices?

Seven years is the safe default for most business records. IRS requirements vary from three to seven years depending on the situation, and some documents like formation papers should be kept permanently.

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Should I connect my bank account to QuickBooks or enter transactions manually?

Connect your bank account. Bank feeds save hours of data entry time and reduce typing errors. You'll still need to review and categorize transactions, but you'll start from accurate data instead of hoping you entered everything correctly.

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What Restaurant Expenses Are Tax Deductible?

Almost everything you spend to run the restaurant is deductible. Food costs, labor, rent, equipment, supplies, marketing, even the music license. The key is tracking it properly and categorizing it correctly.

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