29 Jun 2018

How Do Taxes on Online Sales Affect Colorado E-Commerce Firms?

Paying Taxes OnlineOnline retailers in Colorado should brace themselves for more expenses to comply with new sales taxes, following the U.S. Supreme Court’s ruling over the matter.

The rule will particularly affect the profit margins of small businesses. Some companies, especially startup retailers, find it hard to establish their niche in the market given with the tough competition to lure online shoppers.

New Tax System

The new system works by allowing states to charge sales taxes on purchases originating from outside the home state. For instance, an e-commerce company in Colorado will need to collect tax from online shoppers who live in California. The tax rate and its calculation will depend on the customer’s location.

This can be problematic since online retail has never been slapped with sales tax for around 20 years, but traditional retailers believe that the regulation will help in leveling the playing field for the entire industry. On the other hand, the sales tax should serve as another reason why startup companies in Colorado should invest more in strategic advertising.

Digital Advertising

Its hard to imagine how an e-commerce startup would stay afloat without digital advertising tools. In Denver, SEO campaigns can be specific only to your target market, while social media advertising should be mobile-friendly due to the prevalence of smartphones.

Even established businesses should rethink their online marketing strategy, following the new sales tax’s dent in their operational expenses. If your old system doesn’t produce positive results, it may be time to switch to a new digital marketing agency.

There are still many uncertain provisions on the new sales tax law, but companies should already consider how to meet compliance. At the same time, it’s better to focus more on better marketing and advertising strategies to drum up more business and make up for the added costs.

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