I'm based in the Philippines, and I just want to confirm if only those who have nexus in the US are obligated to pay sales tax. From what I have researched, those outside of the US are only obligated to pay the income tax in their own countries, correct?
However, I will be selling items from printful. Will I have to pay taxes for the items I sell through them?
Also, I am not sure as to how Philippines to any other of the big 5 countries to dropship to works, in terms of sales tax. Is it the same as with the nexus of the US, or are there any other things we need to know in terms of sales tax?
Nick here from Shopify.
Great question. Taxes can be difficult to figure out especially with the added addition of Printful drop shipping in the mix. The first thing I will recommend is to visit your local tax office or a professional accountant about your taxes. Tax laws are different for every country and even regions within countries, because of this it is best to seek out a professional in the region you are based to understand what exactly you need to do.
Regarding how taxes work when using Printful when you're setting up tax rates on Shopify, you are asked to add a physical presence. Since Printful is your fulfillment service, the address you add would be Printfuls. The Printful team created a video tutorial going through the steps on how to add your tax settings which you can see below:
I hope this helps and answers your questions. Please let me know if you have any other questions about this or anything else. 🙂
All the best, Nick
After the Wayfair decision many US states has started taxing remote retailers, meaning that if a company has economic nexus in some state they have to charge and collect sales tax there, as soon as they surpass certain sales thresholds. This rule applies both to US and non-US companies.
For more information on nexus, check The Ultimate Guide to US Economic Nexus.
Hope that helps!
There is a lot of confusion on this. It does not help, as companies that sell US tax sales tax software add-ons, profit from selling fear and confusion.
Individual states, has no jurisdiction, to implement International treaties; that is the domain of the US Federal Government. However, expect another State vs Feds court case going all the way to SCOTUS again over this issue.
If your business is foreign, and you have no salespeople or other employees, agents, contractors, warehouse, office or other property or buildings in the USA; and you don't deal with fulfillment centers (such as Amazon), or dropship from a US location, and you are not an American citizen you are safe.
For example, I'm Canadian with all my business assets in Canada. I ship a parcel to my customer in the USA using Canada Post. The customer receives the parcel, and they pay no sales tax. The fact that US customs and USPS handles the parcel is immaterial, as my agent is Canada Post that handles the logistics, not my company. The same with FedEx Canada, or UPS Canada.
Second, if a US state is going to challenge this, they are going to after a large non-US company the size of Wayfair, not small or midsize companies for a test case.
Eventually, we will probably see US Customs, taking on the role of collecting state, and local taxes on behalf of the state. This is how we do it in Canada for GST, PST/HST
Until then, you have an advantage over your US competition, and save some of the profits for a Tax Accountant that has expertise in US trade, just in case.
We are a Canadian company shipping goods into most US States. We were told by our auditing firm KPMG that we met the economic threshold for California and effective April 1st 2019 we must collect tax on orders shipping to California. Shopify seems aware of economic nexus but they don't charge tax properly at least in my case for California. We also have a management consultant who worked for a company that shipped large volume into Ohio. One day an auditor (not sure if it was state or federal) showed up at their office in Mississauga and audited their sales shipping into Ohio and they had to pay tax. Not sure what laws this falls under but the auditor representing Ohio in that case seemed within their right to be there and ask for the information they did.
If you're under the economic nexus thresholds it's all irrelevant you don't need to charge tax. We have reviewed economic nexus thresholds in other states and our accounting team will be meeting with KPMG again to clarify not only for California but possibly other states.
I don't trust accounting firms and companies that sell tax compliance software, as being unbias.
The following article from Bloomberg provides a more neutral approach.
It does make sense. The US Federal Government is the only party that can enter into tax treaties, with other countries, not individual states, under the US constitution. However, I expect this to head back to the US Supreme Court before it is resolved.