Financing, tax rates, and accounting
I have just taken over a Shopify business. I am SO overwhelmed with just about everything! One thing I am trying to get straight is sales tax. I've been researching and trying to get straight answers but I can't seem to get a direct answer. I am in NJ and I'm shipping my goods out of NJ to other states in the United States only, for now. Do I just charge sales tax to everyone in NJ, or does EVERYONE I sell to in the US get taxed? HELP! lol Thank you!
Hey Christine,
Congrats on acquiring your new business. Super exciting.
I had just written out a long post and it didn't take, so I am going to give it another go in slightly shortened form. What I think you should do first is determine where your business has nexus. You will need to register and collect anywhere you have nexus. You can talk to your previous business owner and you can also work on that on your own. You could have a physical nexus or economic nexus.
1. Determine where you have nexus.
Physical nexus means you have a physical presence in a state—like a store, office, warehouse, employees, or inventory—and must collect sales tax on sales to customers in that state. Economic nexus occurs when your sales or transactions in a state exceed a certain threshold, usually $100,000 in sales or 100 transactions per year, even if you have no physical presence there. Physical nexus is triggered by tangible connections, while economic nexus is based on your business’s financial activity in a state. The 2018 Wayfair decision allowed states to enforce economic nexus laws, expanding tax obligations for online sellers. If you meet either nexus condition in a state, you’ll need to register, collect, and remit sales tax there.
2. Register and turn on calculations.
Once you have a good idea of where you have nexus, make sure you get registered with those states if you are not. Then go to your Shopify tax settings to turn on tax calculations. Go to settings -> Taxes and Duties -> United States -> + Add Region and add those states. Once that's done, anytime you ship to that state the proper tax will be collected from your customers. It will then be your job to hold onto those funds and remit it with your filings to each of those states when the time comes.
Step 1: Start by registering and collecting sales tax in New Jersey if you haven't already.
Step 2: Check for any states where you may have economic nexus. For a starting business, you probably don’t have nexus in many other states right now, but as your business grows, it’s worth keeping track.
I hope that helps! Let me know if you have any questions!
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