I'm Ann, from the team here at Shopify :)
Taxes can definitely be tricky! Our team aren't tax experts, so I would absolutely recommend reaching out to a local tax authority in order to make sure you have everything set up correctly. That said, we have some information that might help you get started! Check out this page in our Shopify Manual, it will go over things in more detail.
Again, once you do that, definitely double check this with a local tax expert, however, I hope this helps! If you have any more questions or concerns feel free to reach out to us on this thread :)
Have a great one,
Hey Justin! You only need to collect and remit sales tax in states where you have nexus.
If you have sales tax nexus in a state that requires sales tax collection, then you’re required to collect sales tax from all buyers in that state regardless of where the item is shipped from.
If you do not have sales tax nexus in a state, then you’re not required to collect sales tax when you sell online to buyers in that state (regardless from where the item is shipped).
I recommend reading TaxJar's Sales Tax Guide for Shopify Sellers for additional information. Good luck!
Thanks all! I would be most appreciative if I could obtain a bit more clarity.
I have a client that is based in Indiana, but ships to the entire US. The first sale was to New Jersey. Everything that I read for New Jersey (including Tax Jar guidance) is telling me that we need to apply for sales tax collection in New Jersey and collect it because their rules establish a nexus when products are shipped into the state. This being the case, all of the general guidance, including the tax page for Shopify, indicates that one only needs to collect tax in the state that you have a presence with either a store, a warehouse, or an employee.
Couple of questions to the group:
- While this general guidance of course makes sense, I know that many states are now trying to cover online sales and find it unlikely that New Jersey will be the only one. Given this trend, is this guidance just a bit too vague or did we just get unlucky and happen to make the first sale to the only state that creates a nexus just by shipment to it? Do most other states not follow this rule?
- When it's stated to ask a "professional tax expert," that generally means me, the CPA advising my client. When I look at this guidance and compare it to what the state of NJ says, my CPA super powers make me feel strongly that we should be assessing every single state for whether or not shipment to that state creates a nexus and plan accordingly. This is quite an undertaking and I can't imagine we are the only one. Would Tax Jar provide any assistance in this or is this something that every e-commerce company goes through? There are 43k zip codes in the US and 1k in NJ alone, Are there Shopify sites that have entered thousands of "physical presences?" Is Shopify not really designed for an organization that could very well ship to every zip code in the country?
- If we were to use a tool like Tax Jar, would it automatically identify that our shipment to NJ created a tax nexus and thus tell us that we owe taxes? While we may lose the money on the sale, is it at least a way that we can identify if we are delinquent with a state? Or does Tax Jar follow the same pattern as Shopify that it is entirely up to us to tell Tax Jar that we have a nexus in NJ by operation of shipping to the state?
Thank you so much for any clarity that you would be able to provide!
New Jersey considers a seller to have sales tax nexus in the state if you have any of the following in the state:
Would you be able to show me where on the TaxJar website you see nexus for NJ being tied to shipping goods into the state?
As for assessing which states your client has nexus, I recommend reading TaxJar's blog post on When to Register for a Sales Tax Permit. You can turn on sales tax collection in Shopify for any state you determine your client has nexus.
You may find TaxJar's Sales Tax Guide to Shopify to be helpful. Good luck!
Justin, I think you're confusing "Delivery of merchandise IN New Jersey", which I think means you're receiving merchandise in NJ that you will then sell and establishing nexus, and "Delivery of merchandise TO New Jersey", which means you're selling your goods to someone in NJ and does it establish nexus.
I'm NOT a tax expert by any means, but I've found that the language can be confusing, as this case illustrates. I would state the first as "Receipt of merchandise in NJ", but sadly I don't write the tax laws :-(
i'll be interested to see if anyone agrees with my interpretation. Like you, I definitely want to stay on the right side of the IRS and they seem to go out of their way to make that difficult to do!
I must say we use Tax jar and it is perfect for us. It tells you even the localities taxes you ship to. We are in CA so it is very complicated. We take numbers from Tax Jar and enter them in Board of Equalisation. However it takes a Bookkeeper to do it I treid one time it is very hard to figure out because you have to not only know taxable sales but also non taxable sales, international sales and so on..