Taxes
Manually added tax rates
Assigned state
When a tax rate has an assigned state, Dappr will automatically suggest that rate when adding taxes to an invoice or quote. The rate will not, however, be applied to quotes or invoices automatically. You will have to select the rate from the taxes dropdown to apply it to an invoice or quote.
The rate will also not be added automatically to sales at retail locations that are using Dappr POS. The rate must be added to the location's POS manually and assigned to product tax categories.
Nexus monitoring
Dappr's nexus monitoring feature helps you stay compliant with state laws by automatically collecting sales tax when required, and notifying you if you meet the thresholds for economic nexus in any given state.
What is nexus?
Tax nexus determines whether a business has a sufficient connection to a state to require it to collect and remit sales tax on taxable sales made to customers within the state. This connection is established by various factors, such as having a physical presence in the state, such as employees or a physical storefront, or reaching a certain sales threshold within the state.
The rules for tax nexus vary by state, and it is important for businesses to understand their obligations in each state in which they have tax nexus. Failure to comply with the tax laws of a state can result in penalties and interest.
In recent years, the rise of e-commerce has made it more challenging for states to determine tax nexus, as many online businesses may not have a physical presence in a state but still make significant sales to customers within the state. To address this issue, some states have adopted economic nexus laws, which establish tax nexus based on a minimum sales threshold, regardless of whether the business has a physical presence in the state.
Types of nexus
There are two types of nexus: Physical nexus and economic nexus. Economic nexus and physical nexus are both terms used in the context of sales tax collection, but they refer to different concepts.
What is physical nexus?
Physical nexus, also known as "physical presence," is a legal concept that determines whether a business is required to collect and remit sales tax on transactions that occur within a particular state. If a business has a physical nexus in a state, it is considered to have sufficient contact with that state to be subject to the state's sales tax laws.
Examples of physical presence can include having a brick-and-mortar storefront or office within the state, having employees or representatives who work within the state, or storing inventory or other property within the state.
What is economic nexus?
Many states have taken steps to expand their sales tax collection authority beyond physical nexus. Some states have enacted laws that establish economic nexus thresholds, which require out-of-state businesses to collect and remit sales tax if they have a certain level of sales or transaction activity within the state, regardless of whether they have a physical presence there. This has become increasingly common as more commerce has shifted to online sales, which can make it difficult to establish a physical presence in a particular state.
Economic nexus thresholds can vary by state and are typically based on either the amount of sales revenue generated within the state or the number of transactions that occur within the state. For example, a state may require out-of-state businesses to collect and remit sales tax if they have more than $100,000 in sales revenue or 200 transactions within the state in a given year.
Dappr is tracking your economic nexus obligations automatically. To find nexus monitoring status for each state, go to Sales > Tax > Nexus Monitoring in your Dappr dashboard.
Automatic sales tax collection
When you have enabled automatic sales tax collection for an invoice, as seen in the screenshot below, Dappr will automatically calculate sales tax based on the customer's billing ZIP code. Do keep in mind that ultimately you are responsible for ensuring that taxes are collected and remitted to the state in accordance with the law.
Handling sales tax balances
When the sales tax is collected, Dappr will automatically update your sales tax balance and syncronize the sales tax balance with your bookkeeping. A sales tax account is created for every state where you are registered to collect and remit taxes.
Your combined sales tax balance will always be deducted from your scheduled payouts. When it's time to remit collected sales taxes to the state, you can request a manual payout of the sales tax balance.
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