Business explosions are often followed by money-making opportunities within those businesses. With TikTok, the red-hot display showcase of short videos and influencers with more than a billion monthly active users, that opportunity takes the form of TikTok Shop.
The forum enables product discovery, checkout and post-payment activities from within the TikTok app. TikTok has told The New York Times that it has already signed up 200,000 sellers to Shop and that more than 100,000 creators could make videos and livestream with shopping buttons.
Is TikTok Shop a marketplace or eCommerce platform? And how do you manage TikTok Shop sales tax when selling on it?
Familiar TikTok Shop rules – to a point
Analysts have pointed out that TikTok Shops allows businesses to create a shoppable experience directly within the TikTok platform. “Users can browse products, add items to their cart, and complete a purchase without ever leaving the app. It’s a seamless integration that combines the spontaneity of social media with the convenience of online shopping,” says Wallaroo Media, a Utah-based marketing and advertising agency.
TikTok Shop is only available right now to businesses in the U.S., U.K. and a few other countries, though it’s expanding constantly. As a marketplace facilitator, TikTok spells out on its Shop Academy FAQ page that it’s legally required (under jurisdictions’ marketplace facilitator sales tax rules) to calculate, charge and collect applicable taxes on all sales made through TikTok Shop, which uses an unidentified third-party for sales tax compliance.
(Shopify, another cutting-edge eCommerce outlet, is not required to collect and remit sales tax for its sellers as it is not a marketplace facilitator like Amazon, eBay, or Etsy.)
“Prices displayed on the platform do not include applicable sales taxes,” the primer reads, “which are calculated and charged at the time of checkout.” The primer adds general background on sales tax and their current applications across the various states, as well as mentions that tax on shipping and handling can also vary.
One key point: “Currently, TikTok isn't supporting a buyer exemption system where exempt buyers can purchase items tax free on TikTok Shop. We … are working to build the functionality to accept and validate exemption certificates to enable exempt buyers to make tax-free purchases.”
More-familiar rules
Sales tax is often levied on sales of tangible personal property – most goods that show up on TikTok Shop. TikTok Shop collects and remits sales tax on behalf of its sellers. However, Shop sellers would need to consider the sales via Shop as they could contribute to economic nexus thresholds in various states. If Shop sellers are also selling on a separate platform, they may need to register with appropriate jurisdictions to collect and remit in states where they have enough sales to create economic nexus and then file sales tax returns and remit collected sales tax.
Can you depend on TikTok Shop’s sales tax calculations? Most likely – but it might be wise to have a system to double-check your compliance if your sales are still limited enough for this to be practical. And of course, keep all documentation to back up your compliance position should your remittance or filing ever be questioned.
When making sure of your sales tax compliance, never leave anything to chance.
Sales tax is more complicated than ever. Rely on sales tax experts to maintain your compliance. Contact TaxConnex to learn what it means when sales tax is all on us.
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