Accounting Solutions For E-Commerce Businesses
If you run an Amazon Store, a Shopify business, or any other type of e-commerce investment, you will need to keep records and store them in a very organized manner. Accounting for an e-commerce business is no different to accounting for a brick and mortar business, but there are several more choices you can look into.
When it comes to the financial side of a business, there are often several common questions that an e-commerce business has. These include the following:
• Should you think about incorporating?
• Should you charge sales tax?
• Should you charge provincial sales tax?
• Should you register for sales tax in the US?
Let’s explore these in turn.
Should You Think About Incorporating?
If you have worries about liability then incorporating is a good option. The reason is because it gives you more protection over your assets (personal) from creditors. In addition, if you’re making good profits, you should also consider incorporating, from a tax point of view.
If you are going to incorporate, you might not have a clue where you should start. E-commerce businesses are truly global, after all. Put simply, you should incorporate in Canada if you do most of your business from there, i.e. that is your location physically.
Should You Charge Sales Tax?
This depends on the products you’re selling online, and how much money you’re earning. The golden figure is $30,000 per year, and in that case, yes you will need to register and charge sales tax. You could still decide to do so, if you earn less.
When setting up your platform (Amazon, Shopify, etc), you should ensure that your setup allows you to collect this tax from multiple areas.
Should You Charge Provincial Sales Tax?
This depends on the province you’re in. You should check ahead of time to find out the specific areas which demand this, and which don’t.
Should You Register For Sales Tax in The US?
This is a complicated area, and a personal decision unless you decide to incorporate in the US. If you have an office in the USA, whether you are personally there or not, you’ll need to register. If you don’t, then you need to think about the advantages and disadvantages of whether to register or not.
E-commerce businesses fall into that grey area much of the time, and the US sales tax side of things, when not physically in the US is one of those areas. If you have a lot of customers from the US, this is something you might want to consider registering for.
Overall, ensuring that you cover the absolute basics when it comes to tax and accounting for your e-commerce business is vital. Just because you don’t have a static office and employees, doesn’t mean that you are exempt from the complicated nature of tax requirements, and it actually means you’re more likely to miss something important, if you don’t do your research.
We hope this post helps you cover all bases and helps you pick a platform which allows you to charge taxes whenever necessary.
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- Written by: Jag Bath