How do you setup economic nexus in an origin state?

Tourist
4 0 1

We sell to Illinois but our office is in CA (economic nexus).    When I setup Illinois it asks for a zip code as if we have physical presence (but we don't), but since it's an origin state, it collects sales tax based only on that one zip code and I want it to collect based on our customer's shipping address instead.    I can't find any documentation on this.     Am I totally confused?

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Shopify Staff
Shopify Staff
353 42 55

Hey, @HBaby!

 

Lulu here from the Shopify Support team. Thanks for reaching out here, and I'll be more than happy to help you out.

 

I definitely understand tax laws and regulations are complex and can change often but you can set up Shopify to automatically handle most common sales tax calculations. You can also set up tax overrides to address unique tax laws and situations. Shopify uses many default sales tax rates, which are updated regularly. If you use the default rates, then you need to confirm that they are current and correct for your particular circumstances. You can override them whenever necessary.

 

Shopify doesn’t file or remit your sales taxes for you. You might need to register your business with your local or federal tax authority to handle your sales tax. The calculations and reports that Shopify provides should help make things easier when it’s time to file and pay your taxes. You should always check with a local tax authority or a tax accountant to make sure that you charge your customers the correct sales tax rates, and to make sure you file and remit the taxes correctly.

 

We cannot give any legal advice so we recommend speaking to a tax accountant to ensure your taxes are set up correctly, however, we do have two resources which are super helpful. This United State taxes guide goes through nexus and physical presence and we also have this guide in our Shopify blog: A guide to Economic Nexus & E-commerce. These resources should help you out greatly but for any specific tax questions, you will need to speak to your tax accountant to ensure you are complying with the laws in your local jurisdiction.

 

If you need anything else in the meantime, please don't hesitate to reach back out. You can also ask us all sorts of things. If you want our opinion about your business plan or site layout, even with marketing and growth aspects you're curious about, then be sure to reach out. Almost anything you have questions about when it comes to eCommerce, I've likely at least seen others touch on before and will be glad to help you too! 

 

Kind regards,

Lulu

 

Lulu | Social Care @ Shopify
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Tourist
4 0 1
Hi Lulu,

Thank you for your reply, but I think you misunderstood my question. I
want to know how to setup the state of Illinois in Shopify. I'm not
asking about remitting taxes. The Shopify system is collecting sales tax
only in one zip code no matter where the customer lives. I can't figure
out how to setup Illinois to collect sales tax where the customer lives.

I talked with a customer service agent, and she couldn't seem to tell me
how to create the setup.




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Shopify Staff
Shopify Staff
353 42 55

Hi, @HBaby.

 

Thanks for getting back to me. Illinois is an origin state, so when a sale takes place in an origin state the zip code of the store’s nexus in that state is used for tax rate determination. It is all listed within the guides. Please take a moment to read through the guide and blog fully as it has all the information you need. 

 

Kind regards,

Lulu

Lulu | Social Care @ Shopify
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Click Accept as Solution 

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Tourist
9 0 1

I just figured this out for myself a couple of weeks ago. So when you go to remit your Illinois sales tax, you'll discover that for out of state sellers, Illinois (an origin based state) only requires you to collect 6.25% sales tax for the entire state. You are not required to charge any of the extra tax based on location. Now in Shopify, you want to make sure that you're charging only 6.25% sales tax for the whole state (and if this rate changes for Illinois in the future, you'll need to remember to go and edit these settings). So you have to set up a tax override for both your products AND shipping. So what I did was I created a collection that includes all of my products (I don't sell anything that wouldn't be taxable in Illinois, but if you had items that wouldn't be taxable in Illinois, leave them out of this collection). I then created a tax override for this collection. See my screen shot. I got this from Shopify, and it seems to have worked. You'll need to then also add a Shipping override and make the same selections.

 

 

Screen Shot 2019-11-01 at 1.29.39 PM.png

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Tourist
4 0 1
Dizzlebabe,

Thank you so much! I am so grateful. No one at Shopify could give me
an answer on this, they kept saying it was an origin state and that they
don't offer tax advice. I couldn't get them to understand my question.


Thanks again!
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Tourist
9 0 1

You're welcome! I'm glad I can help. I, too, have been frustrated by the Shopify support. Sometimes they offer good advice, but other times, I swear they are not REALLY reading what I'm saying. It's like they're just skimming my problem, pulling out keywords, and responding with the response designed to deal with those most common keywords. It's very frustrating. I'm still struggling with an issue with the state of Virginia. They are an origin-based state, but for out of state sellers, you must collect as destination based. Yet Shopify's system doesn't allow you to do that. I still haven't figured out that workaround. I just wish that Shopify would get with the times and reprogram the sales tax stuff to be able to deal with physical AND economic nexus, now that it's a thing, and has been for over a year now.

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Tourist
4 0 1
Agreed wholeheartedly!
Thanks for your help, and as we add on states I'd be sure to share in the
community as you just made me realize how helpful it is.

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New Member
1 0 0

How did you set-up a collection that included everything you sell?  I can't seem to find documentation on how to do that.  

 

And I agree that Shopify has done a terrible job of preparing themselves for the implementation of the new sales tax laws.  I'm facing California, Virginia, Arizona and Ohio all with hundreds upon hundreds of various city, county and state taxes that Shopify expects me to enter manually.  

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Tourist
9 0 1

@NormiesMom wrote:

How did you set-up a collection that included everything you sell?  I can't seem to find documentation on how to do that.  

 


I went to the Products menu, then to Collections. Then click the "Create Collection" button in the top right. I named my collection "All products." In the "conditions" section, you'll need to pick criteria that match all of your products. For instance, for me, my product vendor is the same for all of our products. So I just said, "product vendor", "is equal to," and then I picked the only vendor in the list. If this didn't work for you, you could create a tag that you apply to all of your products. You could call it "all" or "all for sales tax" or something like that. Then in your collection, you could use that as a criteria where "product tag", "equals", "all for sales tax." Then you just need to make sure that any new product you add falls into this category... if you're using the tags, then you have to remember to always add the tag to any new product. If this isn't clear, let me know and I can try explaining again.

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