This might help out some of you, since I just got off the phone with California sales tax representative.
- have no physical presence in California (usually applies to remote sellers)
- make less than $500,000 in (online) sales from customers located in California
Then you only charge flat-rate 7.25% sales tax to CA customers.
But if you start making $500k or more in California, then you're considered to be "heavily engaged" in doing business in California so you have to charge district sales tax (meaning: state + county + city) even if you don't have any physical presence there.
Just my 2 cents.
Nick with Shopify: Thanks for your post about California sales taxes.
Without getting into the complicated tax advice issues involving origin and destination, our company, based in the city of Tustin in Orange County, California was audited by the then State Board of Equalization (now some other name). Because we attend conferences and tradeshows in different cities within California, keeping track of where we did and didn't have a presence became messy. The easiest solution by far is to simply collect sales taxes based on the shipping destination for the product. We then breakdown these different zones on the standard sales tax forms when we pay the state. Our accounting software is set up easily to handle these issues and all of the various districts are in the software and these rates are calculated easily, reports are simple, life is good.
But now I'm looking at Shopify and I'm baffled that you apparently do not have a way to accomplish this, at least that's what a support person told me on a long support call today. Just to be clear; Whenever a product is shipped within California, we need to charge whatever state/county/city taxes are in effect for the DESTINATION regardless of having a presence. The Shopify support person said the only way to accomplish this is to create a zillion different "locations" so that Shopify would charge those taxes accordingly. Wow, that makes no sense.
You have the various entity tax rates loaded into Shopify. Why can't those rates be used automatically when a customer fills out their Ship To location based on that destination? It would be such a simple option to provide Shopify sellers this feature. It would appear Shopify caters to mom and pops where this wouldn't be a problem.
Is there a reasonable way to accomplish this sales tax calculation automatically with California rates?
If I'm understanding this correctly the work around to have destination tax calculated in California correctly is to add all 2589 zip codes in as a physical location in California that Shopify has listed when you click on the county, municipal and other tax hyperlink in the tax setting?
I'm chiming in. I am my company's web developer and this problem was just brought to me by my associates in accounting. I was hoping I could do research to learn how to configure the Shopify to work correctly for CA businesses getting correct sales tax from CA customers. I'll still contact Shopify to try my luck, but judging from the comments here, I'm gonna have to go back to accounting with bad news on this matter. There are similar threads on hear from four years ago, complaining about this issue. Hopefully Shopify will decide to fix this and put developers on it soon!