Do I need to collect sales tax if I sell online?
The short answer is probably yes, depending on where your customers are and how much you’re selling. A 2018 Supreme Court case changed everything for online sellers, and most states now require you to collect sales tax even if you have no physical presence there.
Before 2018, you only had to collect sales tax in states where you had a physical presence like an office, warehouse, or employees. The Wayfair decision changed that by allowing states to require sales tax collection based on economic activity alone. Now if you sell enough into a state, you have to collect and remit their sales tax.
Most states set their threshold at $100,000 in sales or 200 transactions per year. Hit either number in a state and you’ve created what’s called economic nexus. You’re then required to register, collect the appropriate tax rate, and file returns with that state. Some states have higher thresholds, a few have lower ones, and the rules keep evolving.
Virginia’s threshold is $100,000 in annual sales or 200 transactions. If you’re based in Richmond and selling to Virginia customers, you need to collect Virginia sales tax regardless of volume since you have physical nexus here. The economic nexus question only matters for out-of-state sales.
Tracking all of this manually gets complicated fast. You need to know where each customer is located, what rate applies to their address, and whether you’ve crossed the threshold in their state. Most e-commerce platforms like Shopify and WooCommerce have built-in tools or integrations that calculate and collect sales tax automatically. These tools handle the rate lookups and apply the right amount at checkout.
Collection is only half the problem. You also have to file returns and remit the tax you collected. Each state has its own filing frequency, forms, and deadlines. Some require monthly returns, others quarterly. Miss a filing deadline and penalties start accumulating.
If you’re selling across multiple states and crossing nexus thresholds, sales tax services can save you significant time and help you avoid compliance issues. Registering in the right states, setting up collection correctly, and filing returns on schedule is more work than most small business owners expect.
The good news is that once the system is set up properly, collection happens automatically. The ongoing work is filing returns and staying compliant as states update their rules. A Richmond bookkeeper familiar with e-commerce can help you understand where you have nexus and make sure you’re not missing obligations that could turn into problems later.
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More Questions
What records do I need to keep for sales tax audits?
Keep all sales invoices, exemption certificates, tax returns filed, and bank records that show how you calculated what you collected and remitted. Virginia requires you to hold these for at least three years, though four to six is safer.
Read answerHow do I track cost of goods sold when I sell online?
Track the landed cost of each product including purchase price, inbound shipping, and packaging materials. Use accounting software with inventory tracking enabled so COGS records automatically when items sell.
Read answerDo I need to offer benefits if I have employees?
Most employee benefits are optional for small businesses with fewer than 50 employees. Health insurance, retirement plans, and paid time off aren't required under federal or Virginia law. Workers' comp and payroll taxes are mandatory regardless of size.
Read answerCan my accountant access my QuickBooks file?
Yes, and you should set this up. QuickBooks Online includes a free accountant user slot specifically for this purpose. QuickBooks Desktop requires sharing the file directly or sending an accountant's copy.
Read answerWhat financial reports do contractors need to review regularly?
Job cost reports, profit and loss statements, cash flow projections, and accounts receivable aging are the essential reports. Job costing should be reviewed weekly on active projects while others can follow monthly rhythms.
Read answerWhat's the best way to handle inventory for an e-commerce business?
Inventory tracking for e-commerce requires systems that sync across sales channels and connect to your accounting software. The challenge isn't just counting what you have. It's making sure your books reflect accurate costs and quantities without manual data entry creating errors.
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