I'm hoping somebody is, or has been, in a similar set-up to what I have going on, and will be able to provide me some solid advice in regards to setting up my tax settings.
My business model is print-on-demand drop-shipping.
I'm based in England in the UK. So on paper that's where I operate my business from.
I sell apparel, and The Dream Junction are my fulfilment company for all my orders, who are based in California, US.
I sell everywhere. UK, United States, Canada, Australia - everywhere.
So my business is in the UK, my products are shipped from the US, and the products could be shipped anywhere in the world.
I've spent all day reading up on my set-up and the correct way to set-up my tax settings in my Shopify back-end, but I'm still not entirely confident.
Can anybody provide any solid advice?
Julie here from Shopify Support.
It's great to hear that you're considering how to set up taxes on your store. This is something that can often be overlooked so I'm glad you're doing your due diligence.
While Shopify gives you the ability to charge sales tax, whether or not you are required to collect this tax if you are selling internationally from the UK would be something you'll need to speak with a qualified tax professional about, especially since tax laws vary across countries.
That being said, typically, businesses are only required to charge sales tax in the countries they have a physical presence in. For example, if I have a location in Canada and a Canadian shopper makes a purchase, they will be subject to Canadian taxes. If I have that same Canadian location but a customer orders from the United States, there will be no taxes charged on the purchase.
However, because you are dropshipping and fulfilling items from the United States, things may get a bit more complicated. In this case, nexus could come into play and you may be responsible for charging US sales tax in California. To concretely determine whether this is the case, I recommend having a sales tax professional take a look at your dropshipping setup and provide you with a detailed nexus assessment. I also managed to find some useful articles from TaxJar that may provide you with some further insight:
The comments sections in each of these articles are also full of useful questions and answers that should help guide you along. Nonetheless, I strongly suggest reaching out to a local tax expert for guidance. While this doesn't necessarily provide you with a direct answer, I hope it helps drive you in the right direction!