What is Tax?
Tax or taxation is a financial charge levied on a legal taxpayer or a corporation by a government entity to put it towards public expenditures. E-commerce tax compliance policies dictate the amount to be paid at a stipulated period. It is imperative to pay e-commerce taxes on time as non-compliance may lead to punishment and evasion from legal matters.
Significance of Tax
Several resources are fulfilled with the tax paid by the concerned citizen or corporation. Some of the main benefits of tax are:
- Tax contributes to the national economy and funds public infrastructure.
- Scientific research is made possible using taxpayers’ money to support and develop new reforms such as medicines and cures.
- The defense ministry receives appropriate funds for handling matters of national defense and security.
- The availability and facilitation of public transport are thanks to tax.
- Government servants provide pension schemes through tracking of taxes.
- The law enforcement section is taken care of by the amount put in by the taxpayer.
- Utilities such as water and electricity are taken care of with taxes.
Prerequisites to Pay Tax and How Tax Works
Logistics is a vital area for the implementation of taxes. To understand more about how it operates there, let’s explore its prerequisites.
- Goods and Service Tax – In countries like Singapore, a 7% GST is levied by the government.
- Excise duty – Excise duty is levied on imported goods. However, online retailers are an exception in the case of Singapore.
- Customs duty – A customs duty is applied when goods are passed through international borders.
Companies can follows these steps to stay compliant to e-commerce sales tax:
- Check for economic nexus
- Know whether the products you sell are taxable in that state/country
- Get registered for a sales tax permit in the nexus state
- Collect sales tax
- File a return
Use Cases of Tax
Suppose a company starts selling its products and services electronically to consumers through computerized transactions. It will be categorized as an e-commerce business. If the company earnings surpass the economic nexus as per country laws, they have to pay the taxes implied.