Sales tax in California

[evuschak]

Please please someone help as I am about to launch my first e-shop and I am getting confusing information from tax professionals as well.

I am based in California and my e-shop is selling baby products - cloth diapers and related accessories in particular. I am buying these at wholesale (from multiple countries including the US) and reselling (all across the US, I don't have a physical store).

Could someone please tell me if I need to collect sales tax or not? All the competitors that I checked are not collecting any (but not sure if my state might be different)

[BobsMojo]

Hi evuschak

Let me premise this by saying I am NOT a tax professional or a lawyer and you should not take this as legal advice. Best advice is to follow the direction of a tax lawyer.

With that said, the overall general rule is usually that:

1. You WILL have to collect tax from any sales made to the state(s) where you business is located and/or has any locations (i.e. you are based in CA, so you will have to collect from CA customers. PLUS, say if you have a fulfillment warehouse located in TX, then you would also have to collect tax from TX customers.)

2. Most states now have a sales threshold that require to to register to collect and remit sales tax even if you don't have a location in that state (i.e. once you cross the $100K sales threshold in total sales to MI, you will have to then register and collect/remit tax to MI).

Every state has it's own sales tax laws and you need to be aware of the individual state requirements. There are web-based services out there that help you with this, and some even have Shopify apps.

[evuschak]

Thank you so so much for taking the time to reply! So the sales tax collection applies primarily to customers in my state? (until I hit the threshold for respective other states) And if I choose the "collect sales tax" in my Shopify settings, the tax will be only added to my local customers? That makes more sense to me now, thank you!