Sales Tax and the TikTok Shop
With the rapid rise of social commerce, platforms like TikTok are no longer just for viral dances and trending challenges—they’re also major players in e-commerce. The launch of TikTok Shop has made it easier than ever for brands and creators to sell products directly within the app.
However, as convenient as this may be, it also brings the complexities of sales tax.
When selling through TikTok Shop, sellers must be mindful of sales tax regulations, which vary widely by jurisdiction. In the U.S., for example, sales tax is generally determined by the location of the buyer, not the seller. This means sellers may need to collect and remit sales tax in multiple states, depending on their customers’ locations. Additionally, different states have varying sales tax rates and exemptions.
One critical factor in determining whether a seller must collect sales tax in a given state is ‘nexus.’ Nexus refers to the level of connection a business has with a state. With TikTok Shop, even small sellers can quickly establish a nexus in multiple states due to the platform’s broad reach. If a seller reaches a certain sales threshold or engages in specific business activities within a state, such as having a physical presence or attending trade shows, they may be required to register, collect, and remit sales tax for that state.
What Sellers Should Do:
- Determine Sales Tax Obligations: Sellers should evaluate where they have nexus and understand the sales tax requirements in each state where their customers reside.
- Use Automated Tools: Many e-commerce platforms, including TikTok Shop, may offer integrated sales tax collection tools to help sellers navigate this process more efficiently.
- Be Proactive: Sales tax laws are constantly evolving, especially with the rise of online sales. It’s your responsibility to stay informed about any changes that could affect your business. Being proactive in this area can save you from potential compliance issues.
As TikTok grows its e-commerce capabilities, sellers must pay close attention to sales tax compliance. While managing these taxes may seem daunting, staying organized and utilizing available tools can help streamline the process, allowing sellers to focus on growing their businesses.
If you have questions about managing sales and use tax, we’re here to help.
About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.