I've been back and forth for 2 weeks now with a Shopify Guru regarding changes made with how taxes are collected on Shopify. In the beginning this Guru told me there were no changes made recently to taxes. After much back and forth he finally obliged and sent it to "higher ups" to find out if any changes had been made.
He was finally told that beginning Febuary 2, Shopify made changes to the tax table for Alabama. They started taking taxes from customers in other cities and municipalities that we do not have a physical presence. We are located in Alabama, which is called a "Destination Based" tax state. I don't doubt that but Shopify is using this incorrectly. I've contacted multiple people with the Alabama Department of Revenue and also gotten written documentation from them that the change made by Shopify is incorrect.
If you are located in Alabama, you should only be charging taxes to a customer that you are shipping to within your city or county. If the customer is located anywhere else within the state you only charge state taxes. If you are making deliveries using your own trucks, you should charge the city and county taxes as well for the customer, but NOT if you are using common carrier, like USPS or UPS. How many e-commerce sites are there that make deliveries using their own trucks?
The solution I've been given is to add an exception for EVERY zip code in Alabama. I would have to add each of them through the physical presence box on the tax page and then create an exception for EVERY zip code. There are 838 zip codes within Alabama. I'm located in 1 of those and need to charge taxes for 1 CITY AND 26 WITHIN MY COUNTY.
The destination based tax was created in 2015. Why would Shopify all of a sudden create this new change in 2018 without contacting the state department of revenue to make sure it's being done correctly. And especially without sending notice to Shopify's customer with whom this is affecting? We are illegally taking taxes from customers if we don't refund it or pass it on to the localities it belongs to.
This is directly from the tax auditor for the state:
"You are taxing correctly per your example of the customer being in Birmingham and you would only charge them state tax. But if a customer is in Spanish Fort, then you would charge Alabama, Baldwin, and Spanish Fort taxes. Please see attached rule Seller’s Responsibility to collect County and Municipal Sales and Use Taxes which explains this pretty well. I think your e-commerce company is referring to the Simplified Sellers Use Tax law that was passed in 2015 that addresses businesses located outside of Alabama which make sales into Alabama. Also attached is the Simplified Sellers Use Tax Remittance Program rule. Both of the attached rules may help you explain to your e-commerce company that you are taxing correctly."
Shopify must come up with a fix for the companies located within Alabama who do not require taxing each and every city/ county within the state. Or revert back to how it was CORRECTLY done for the past 3 years before February 2, 2018.
It's sad & interesting that you are facing this problem. I do not have any addition to the tax calculation conversation here. However, I can say that the tax adjustment can be made very easy with the multi carrier Shipping label app. You can provide a list of zip ranges and then subtract a percentage or a value from the shipping cost. Will this be of any help?
I know this is from a while back but I am in Alabama and currently dealing with the same issue and curious how you ended up resolving this or if any conclusion was made. Appreciate any help.
you'd need to create a sales tax override, here's the details...