Confused by taxes & payout

Confused by taxes & payout

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Hey, so this is my first dropshipping online store and I'm confused AF by the taxes. I'm based in California and intend to sell clothing & accessories from suppliers like Printify featuring my designs.

  1. I don't understand how to set up the payout account. When attempting to file business verification, I get this error: "Business tax id does not match company name. Please ensure that your legal business name is exactly as registered with the IRS." I created a logon with the IRS, is that enough?
  2. Do I need the sales permit immediately? Since it's an online store  I technically don't meet any of the 4 requirements, but then again I registered the LLC using an address of a family property that is in CA.

  3. I want to be able to sell to customers located in other countries. How do I even deal with taxes if someone from, say, New Zealand purchases an item? Will the dropshipping supplier automatically charge them?

  4. How probable is it for a supplier to ask for the resale certificate?

Thanks a lot!

Replies 2 (2)

Shopify Staff
1890 212 338

Hi there, @AerieUnfair. Thanks for taking the time to reach out to the Shopify Community Forums regarding your questions around taxes!


Just to set some expectations for you, Shopify Support Staff are not tax experts, and we're not able to advise you on what your tax obligations may look like. When it comes to your 3rd and 4th questions, these would be best directed to a local tax authority.


As for your first question, this error will appear when the Tax ID you're providing doesn't match with the company name you're entering. It could be that you haven't yet completed your tax registration with the IRS, or you have and that information isn't available to Shopify yet for comparisons. You can reach out to our Authenticated Support Team via our Help Center for more in-depth assistance with this error.


As for your second question, can you provide more context around what you mean when you say 'sales permit'? Many folks start online stores without having their business registered, but you will want to take the time to get your business registered in adherence to local law expectations. Again, it would be wise to refer to a local authority on business (like your local chamber of commerce, or governing body) for insight on this.

Imogen | Social Care @ Shopify 
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Shopify Partner
31 1 3

Hi AerieUnfair, I'm not sure about your first issue with the payout account, but can help with sales tax and resale questions. 

If you're physically located in California, then California would consider you, as the owner/operator of the store, to create a physical presence for the business, and you should register for a Sellers Permit in California. If your business has a physical presence in any other states, those would also expect that you register for sales tax permits.  You'll need to start collecting sales tax in California only, for orders that ship to California customers. Shopify can automate this for you. 

Your dropshipper will automatically charge you tax, based on their own sales tax requirements. So if they have a requirement to collect tax in Florida, they will charge you FL tax when they ship to a customer in FL. Depending on your dropshipper they may require you to provide resale certificates in order for your to work with them, or they'll just charge you tax everywhere they need to, which will eat into your margins. 

Once you have 1 sales tax registration, you can use that number to generate resale certificates in many states, without need to register in those states or collect taxes. This will help on your margins. 

Let me know what questions you have and I'm happy to share more guidance, thanks!