How To Determine Which States To Charge Sales Tax?

42 0 9

While setting up the tax settings for my store, I'm a little confused to set which States that will be charged sales tax for customer orders. My business is physically located in TX but we plan to only sell our products online through our web store. We have our products stored at a warehouse located in another State (NY) where shipments of orders will also be shipped out here to the customer.

Does this mean I only have to charge sales tax from orders from TX and NY? I'm not sure if I have this entirely understood but I only charge sales tax to where I have a presence? So in my case only TX and NY? And how does the Tax Nexus play into this?

Shopify Expert
10041 119 1877

Yes. The warehouse would give you a nexus in that region.

That said, I'm not an accountant so don't trust me entirely. It's something you'll want to get advice from a tax professional over.

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42 0 9

That makes sense and especially from what I'm seeing based on articles about collecting sales tax from online orders. All point to the same conclusion, you only collect taxes from where you physically have a presence such as your buisness/company, store/office, a warehouse if your State has a sales tax and if it falls into the nexus tax state.

Shopify Partner
14 0 1

Don't quote me as gospel, but, for me this is the beauty of Shopify. I check the little box that sayes to collect sale taxes. 

I live in Colorado. Depending on what City and what part of the city there may be City taxes and subdivion sale taxes also.

For me the ONLY time that Colorado State sale taxes were ever auto charged has been when a felllow residents of CO ordered.

When I fill out my City and State local sales tax permit there is a line to put how much sales tax I collected for on-line sales, even if I had no sales. Be sure to read the directions for your city and state. I have to repeort all on-line sales, but will not have to a pay anything unless it has been collected. fo rmy area Gratefully I don't have to decide and figure out when and how much because of the way Shopify set-up for me.

I advise you to go to your sales tax agencies to get your proper permits and take a class. It will vary from state to state a LOT! adn from town or county you live in. Most likely you will not have to collect anything unless someone buy from your city and or state. then you will need to submit the form and payment monthly, quarterly or even yearly depending on your estimated sales.

Again, Shopify automatically kicks in that charge for me becasue I clicked the box.. In my descriptions I always write that there are shipping charges as well as city and state sales taxes when applicable added at check out.

Be aware that these sales taxes are changing. Some states are balking at loosing this revenue.

When I took my optional sale tax class there were gals in there who had sold on Etsy for a few years. They had NO idea they had to collect sales taxes NOR report as income. I wish I had a picture of the shocked look on their faces.

Many local vendors have no idea they need EINS: local sales permits; and sales taxe licences that have to be displayed. Shopify biz owners need to have their business registered evey where that is required to from your locality.

While our Shopify stores are not garage sales, I would like make a semi-related statement. Ignorance is not bliss. I have known people and heard about those who held garage sale after garage sale. They racked in thousands of $'s from hobbles. Same with event vendors. They were ignorant that they had to report income sold out of their garage or lemoan aid stand and thery needed proper permits. In fact you may need permits which vary from city to city and state to state in the US.. Some folks have been audited and lost their homes attached to those garages that they sold hobby goods from. I am not kidding. They shoudl have paid the income taxes and collected sales taxes with permits.

My point is: Find out of sure starting with your city. Often times they will help you ther other official phone numbers and email addreses. Don't take my word nor your best friends' cousins word. Get the official word from where you live.

You want to do your research by calling your local and state sales tax and the IRS about what and how you report as income. Sales tax is different from income tax You can be audited and fined without proper permits.

This is your responcibility to take care of as a business owner not Shopify's. But other than that I do believe Shopify has done a great job of getting that built in when you check the proper box. If you don't see it, call one of their fabulous gurus.

I hope this helped.