Please please someone help as I am about to launch my first e-shop and I am getting confusing information from tax professionals as well.
I am based in California and my e-shop is selling baby products - cloth diapers and related accessories in particular. I am buying these at wholesale (from multiple countries including the US) and reselling (all across the US, I don't have a physical store).
Could someone please tell me if I need to collect sales tax or not? All the competitors that I checked are not collecting any (but not sure if my state might be different)
Let me premise this by saying I am NOT a tax professional or a lawyer and you should not take this as legal advice. Best advice is to follow the direction of a tax lawyer.
With that said, the overall general rule is usually that:
1. You WILL have to collect tax from any sales made to the state(s) where you business is located and/or has any locations (i.e. you are based in CA, so you will have to collect from CA customers. PLUS, say if you have a fulfillment warehouse located in TX, then you would also have to collect tax from TX customers.)
2. Most states now have a sales threshold that require to to register to collect and remit sales tax even if you don't have a location in that state (i.e. once you cross the $100K sales threshold in total sales to MI, you will have to then register and collect/remit tax to MI).
Every state has it's own sales tax laws and you need to be aware of the individual state requirements. There are web-based services out there that help you with this, and some even have Shopify apps.
Thank you so so much for taking the time to reply! So the sales tax collection applies primarily to customers in my state? (until I hit the threshold for respective other states) And if I choose the "collect sales tax" in my Shopify settings, the tax will be only added to my local customers? That makes more sense to me now, thank you!