United States: nexus, use tax and marketplace sales

In the United States sales tax is administered state by state. A business files a return in every state where it is registered, on that state's schedule, and has to watch for states where its sales have grown large enough to require registering. There is also no input tax credit: tax paid on purchases is simply part of their cost, and tax that nobody charged you may be owed as use tax.

In a company whose books are kept for the United States, Manage Sales Tax has a row of buttons for this: Registered states, Where you owe, Use tax, Exemption certificates and Marketplace tax. Registrations and certificates are covered in Tax registrations and exemption certificates; this article covers the other three. A Canadian company has Where you owe, Use tax and Exemption certificates too, measured by province, but not Registered states or Marketplace tax (see Tax registrations and exemption certificates).

How US returns differ

• Each registered state is an agency of its own in Manage Sales Tax, with its own period and its own filed returns. Nothing can be filed until a state is registered.
• A state return has no input credit line: Taxable sales, Tax collected or collectible, and Tax owing (or Refund claimed).
• Sales tax on purchases is always posted to the cost of what was bought, whatever the account mapping says.

Filing, paying and reversing work as described in Prepare and file a sales tax return, Pay sales tax and Reverse a filed return.

Where you owe (economic nexus)

Where you owe measures your sales and number of transactions into each state against that state's economic nexus threshold — the point at which you must register and collect there.

The heading counts states exposed, approaching and registered, and a banner sums it up:

• red — states past their threshold with no registration: every sale into them is tax you should have collected and did not;
• amber — states within reach of their threshold;
• green — nothing has crossed a threshold unregistered.

What this rests on lists the assumptions the measurement uses. Read them once. Recalculate measures again.

Thresholds are law, and states change them. Click a state to record a threshold you know to be current: Sales threshold, Transaction count (leave blank if the state has none), and, when there is a count, How the two are read — Either one triggers (almost every state) or Both are needed. Choose Record.

When a state is exposed or approaching, register there with the state, then add it under Registered states.

Use tax

Use tax lists the period's purchases on which no vendor charged tax. Whether each one owes use tax depends on what it was and where it was used — that is your call; the screen narrows the question.

1. Choose the Period.
2. Type Your rate % — your own combined state and local rate, because use tax is charged where the goods are used — and press Enter or Recalculate.
3. The card At most shows the use tax on all the untaxed purchases at that rate: a ceiling, not an amount owed. Anything bought for resale owes nothing.
4. The Untaxed purchases list shows Date, Reference, Supplier, Their state (marked out of state when the vendor is outside your state — the usual reason no tax was charged, but only a hint), Amount and Tax if owed.
5. Work out what is actually owed, then choose Accrue.
6. In Accrue use tax, type the Amount owed (the box starts empty on purpose; Use it all fills in the ceiling) and a Note (optional) saying which purchases it covers. Choose Accrue.

SeroBooks posts the accrual dated the period's last day: the default expense account is debited (use tax is part of what the purchases cost) and the use tax payable account is credited. It confirms Use tax accrued. It is a cost, and it is now owed. Both accounts must be mapped in Company ▸ Accounting Setup first; otherwise SeroBooks says Use tax cannot be accrued until two accounts are mapped…. An amount of zero is refused, and a date on or before the closing date is refused.

Accruing needs Accrue Use Tax.

Marketplace tax

If you sell on Amazon, Amazon collects and remits the sales tax on those sales in every state that has a marketplace facilitator law — which is now every state that levies sales tax. Marketplace tax splits the tax in your Amazon settlements into what Amazon remits and what you must remit, state by state, for the Period you choose.

• Amazon remits — tax collected on your behalf. Do not put this on your own return.
• You remit — tax you collected yourself.
• If some tax lines carry no state, an amber note says how much.
• What to do about it lists findings, such as tax you collected in a state where Amazon already collects (red) or tax Amazon remitted that must not be remitted again (amber).

States differ on whether your marketplace sales appear on your own return. Click a state and choose report as gross, then deduct or leave off entirely, as that state's return instructions say. Until you choose, the column says not recorded — tap to set. Either way, the tax itself is Amazon's to remit.

Recording treatments and nexus thresholds needs Configure Registrations & Nexus.

Related articles

• Tax registrations and exemption certificates
• Manage Sales Tax
• Amazon Taxes
• Accounting Setup