Sales tax

[ZegisApparel]

I live in Texas (Dallas area) and I’m starting a t-shirt e commerce company and will be using a dropshipper. I’ve spoke to several sales tax professionals and have received various information and services available but all seem to be at a fairly high cost. Does anyone have any suggestions for setting up, monitoring, filing, simplifying this sales tax nightmare? Any companies/accountants recommended for someone just starting out? Thanks for any advice you can offer.

[Ana7]

Hi ZegisApparel, 

Have you consider to use a compatible software solution to automate the sales tax mess?

Quaderno sends automatic receipts every time you get paid and issues credit notes every time you make a refund. Quaderno also notifies you every time you surpass a tax threshold or when a tax rate changes anywhere you sell your products or services. If you sell on channels other than Shopify, it brings all of your tax information into one report. Finally, with Quaderno tax reports, tax filing is a matter of minutes not hours. 

Disclaimer: I work at Quaderno. If you have any questions, please feel free t reach out. I'm happy to help.

[majornorth]

Hey ZegisApparel,

I also just started a t-shirt e-commerce company using a drop shipper. I'm registered as a single-member LLC (which effects my cases shared below; your business structure might change your requirements). Here's what I learned today:

• Depending on the state where your business is registered and has an operational nexus (Texas, in your case), you might need to register for a sales tax permit. And, depending on your drop shipping partner, you might need to submit a resale certificate, so your drop shipping partner does not pass through sales tax to you on the cost of each t-shirt. For my case, I am located in California, so I registered for a sales tax permit, then submitted a resale certificate to Printful. This way, Printful won't charge my business sales tax, and I only need to collect sales tax from the end customer and remit the collect tax to the state.
• The Supreme Court ruled in 2018 that e-commerce companies can be required by states to collect and remit sales tax, regardless of whether the company has a nexus (aka physical presence) in those states. However, there's an exemption for very small retailers (<$100,000 in revenue, or <200 different transactions). So, while you're getting started, you should not have to worry about collecting sales tax in a state other than Texas (unless you open another office in another state where you sell, or you have some other type of nexus, such as a vendor or affiliate relationship, or an employee based in another state). It's also important to note that while the Supreme Court said states could collect sales tax from online vendors, that states still need to enact legislation to put this collection practice into law—you'll need to research which states have already enacted legislation, once you've surpassed the revenue exemption threshold. For more context about the Supreme Court ruling, read: The Supreme Court Online Sales Tax Ruling: What Is It? How Does it Affect You?

Finally, obviously, I am not a tax expert, and my above comments should not be taken as legal advice, and I assume no liability for the comments above—as they say, you should consult a tax professional.

Anyway, I hope that's helpful! I spent about 6 hours researching today trying to understand whether I would need to collect and remit taxes to states other than where I operate. It shouldn't be that hard to answer that question.