Lesson 5: Payments, taxes, and shipping options

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You’ve done well so far! There is one last step in preparing your products for your online store. After you sell your products, you have to determine how you want to get paid and plan to deliver the product to your customers.

When deciding, consider who your customer is and how you do business. Are you serving individual customers, or are you processing business-to-business transactions? Are you a brick-and-mortar retailer with a POS system to tie in to? Are you serving a local community, or are you operating at a national or even international level?

Processing payments

There are plenty of payment processing platforms available, but choosing the right platform for you may take a little research. Here are the primary considerations you should make when finding the right platform for your business. 

  • Different payment methods
    Credit cards continue to be the most common payment method for customers, but mobile payments, bank transfers, and eWallet transactions are still available. Credit card transactions only account for half of all transactions globally.
    If you have an international audience, make sure you can accommodate a variety of payment methods. Most platforms handle major credit and debit cards, but what about mobile payments such as Apple Pay or Android Pay, or with more obscure payment forms like Bitcoin or ACH payments? Find the payment methods that work for you.
  • Speed of receiving money
    How quickly you receive money will vary from platform to platform, but on average, you will get paid within two to seven days after the transaction takes place.
  • Cost of platform plan
    Different payment plans exist for different platforms, but for entrepreneurs, we suggest choosing a platform like Stripe, Square, or Paypal that offers no setup or monthly fees. All platforms will charge you transaction fees.
    Transaction fees are generally a percentage of the sale plus a flat amount (e.g., 2.8% + $0.30), and the rates may fluctuate depending on your monthly volume of sales. If you are selling a higher volume of products, they generally will charge you a lower transaction fee. Transaction fees may also vary based on the form of payment being used. Tapped, inserted, or swiped credit card transactions may charge at a different rate than if you were to key-in the card information.
    Other costs you may come across are currency fees, conversion fees, and chargebacks. Pricing options for platforms may seem similar with very little difference in rates, but small margins at large volumes quickly add up, so be sure your choice scales with you.
  • Beyond payment processing
    Some payment processing platforms offer additional benefits to businesses. Stripe and Square both offer point-of-sale (POS) solutions for in-person sales. PayPal and Square offer assistance to entrepreneurs such as company loans. Stripe offers assistance with a wide range of business operations, including incorporating and establishing a digital US bank account.

By offering various payment options, you enhance the customer’s experience, reduce the time it takes to get paid, and open yourself up to more opportunities and customers to purchase from you.

Taxes

Before we start, we’ll put an asterisk on this conversation: we are not tax professionals, and we are not providing tax advice. That being said, we do understand eCommerce and how important it is to make sure that taxes are being correctly collected and allocated in your transactions.

Do your homework and speak with your tax professional or CPA to understand what tax burdens you need to consider. There is no grace period for sales tax, even for the smallest and humblest of online stores, making it crucial that you are tax compliant from the get-go.

KNOW YOUR VOCABULARY: SALES TAX NEXUS (OR NEXUS)

A sales tax nexus is the connection between a seller and a state that requires the seller to collect and remit on sales tax made in that state. Before the Internet, having a physical presence was the standard for needing to establish a nexus, but not anymore. 

Now economic activity (sales revenue, transaction volume, or a combination of both) may trigger a sales tax obligation regardless of physical presence. To cover all your bases, document every touchpoint your business has with another state. Cross-reference your activity with an online tool, such as Avalara, that lets you check state by state to see if your company has a sales tax obligation.

Shipping

Pat yourself on the back! You’re at the final stage of preparing your online store: determining your shipping method. You have a few aspects of shipping to consider before deciding on who your shipping partner will be.

  • How much will it weigh (on average)?
    Knowing how much your products will weigh beforehand will make your shipping tasks more efficient. Unless you’re using a flat-rate box, the object’s weight can affect the price of shipping. Consider purchasing a postal scale or running to your nearest Staples if you have only a few products ship.
  • What shipping method or methods will you offer?
    Typical shipping methods include ground, priority, and first-class. Find the one that works for you, or offer multiple methods depending on your capacity and your customer’s needs.
  • Where are you (mostly) shipping your products?
    Are you planning on shipping domestically, or will you be shipping internationally as well? When shipping domestically, you can refer to the USPS’s Domestic Zone Map to estimate how quickly a package will get to its destination from your headquarters or warehouse, as well as an estimation of the cost.
  • What type of packaging will work best for your products?
    Flat-rate boxes may be the obvious choice since you can pay the predetermined rate listed regardless of the package’s object, weight, or destination. You’re able to pick up flat-rate boxes at your local post office, UPS, or FedEx. If you’re shipping nearby and your products don’t weigh that much, flat-rate shipping may end up costing you more, so consider using your packaging.

Once you have all of the basics determined, begin comparison shopping between the various shippers and carriers. USPS, UPS, and FedEx are the most common and offer special programs for small businesses, so be sure to ask. Regardless of what decisions you come to for your specific shipping solution, be sure to list your shipping rules to mitigate the emails and messages you receive about shipping.

Putting everything into your online story

Breathe a sigh of relief. You’ve done the prep work! If you are using GoDaddy’s online store, follow along with the video below to take all of your products, descriptions and photos, prices, payment options, and shipping methods into your online store!

Part 2 of this course is about growing and evolving your online store to maximize your sales and profitability. If you need a break before continuing, feel free! Otherwise, click “Next Lesson” to continue building your online store and growing your business!