I have some questions regarding sales tax collection I was hoping someone could help me with.
1) When it says you have to collect sales tax in the state(s) where you have nexus, I take that to mean if I have nexus in only PA, I have to collect and report sales tax on purchases made only by PA buyers. Is that correct? And if the only items I sell in my store are items not taxed by PA (clothing) I won't be collecting or reporting anything? The rules requiring sales tax collection in PA are that you need to have more than $100,000 in sales or 200+ transactions (neither apply).
2) But what about other states? I don't have nexus in, say, VA, but they tax clothing. If under the settings for Taxes-United States, it says "tax rates calculated and applied automatically", does that mean Shopify collects and reports the taxes on non-nexus states? I thought there was a place to set each states tax rates, but I can't seem to find it listed anywhere in the tax area?
3) I've done sample tests to see if tax would be charged on a PA order if the "charge tax on this variant button" was selected, and it erroneously does. When it is deselected it doesn't, so I currently have that button deselected on all my products (all clothing). Does deselecting it make it so Shopify doesn't apply taxes to buyers from other states? In a case where an online store doesn't collect sales tax from you, aren't you responsible for reporting it on your own tax return?
You have a nexus where you live and where you have business locations. You must have a license to collect sales tax and your state requires you to have that license. Yes, you only collect taxes for your nexus states. There are new laws where if you have a certain amount of sales in other states you must collect and remit sales to those states. Most have rather large minimums like $50k of sales to that state. As you grow that may become an issue and their are services that can manage that for you but at startup you should be ok collecting only for your home state
taxJar has some articles that make it very easy to understand
Thank you for recommending TaxJar; I've been checking out their articles and they have a lot of information. According to PA requirements, I shouldn't have to apply for a license to collect sales tax because I don't meet the economic threshold. The items in my store would be shipped by a print on demand facility in MI. Since all of my business would be shipped from that state, I'd have "significant presence" there, but I do not meet the economic threshold where I'd be required to register for a license to collect sales tax in MI either.
So if I do not have to collect sales tax for either PA or MI (at least this year, since I know I will be below the economic threshold required), I am also not collecting sales tax in any of the other 48 states either. Do I need to have a disclaimer somewhere on my store site that reminds buyers they are responsible for reporting any uncharged sales tax on their income tax returns?
No, you don't need to put a disclaimer. I am a bit concerned about your interpretation of Pennsylvania law. You live there, you have a nexus there. I think Monday morning you should call either your county clerk or the state department of revenue office for clarification. Usually the economic threshold pertains to people who do not live in state.
Here is a guide to starting a business in Pennsylvania. It is written by the state of Pennsylvania.
Thank you. I understand that by living in PA I have nexus here. But, the items my store sells (clothing) are non-taxable in PA, so there is no sales tax to collect from PA buyers. According to the Pennsylvania Department of Revenue, “any entity making taxable sales or performing taxable services in Pennsylvania must be licensed to collect and remit sales tax." So it is saying if you are selling items that should be taxed, you are responsible for reporting that tax. I also found this: "In Pennsylvania, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto tax collector.
To help you determine whether you need to collect sales tax in Pennsylvania, start by answering these three questions:
If the answer to all three questions is yes, then you’re required to register with the state, collect the correct amount of sales tax per sale, file sales tax returns on time, and remit tax to the state." I can only answer yes to the 1st question, and no to 2 and 3.
Could you point out where I am misinterpreting so I can further research? I am currently waiting on some information from a tax attorney, but I thought I would see what I could find out on my own. They make it so confusing!