Financing, tax rates, and accounting
I am setting up my store and will be selling in the US. In most states, if you initially make less than $100,000, you do not need to charge the sales tax. Can someone please advise how to set this up in my Shopify store? When a customer checks out, they need to see a $0 sales tax added. I am not sure how to do it. I messaged Shopify but they only advised how to completely remove the sales out at check out. The thing is that you still need to show it but it'll be $0 until you exceed your sales and then you need to start charging it.
Hey Maaya2,
I work for a sales tax filing app built specifically for Shopify merchants so I could probably help answer this.
Your question about $100,000 in sales is a good question. I think you are likely referring to economic nexus thresholds and it's possible that your state sets a specific threshold for needing to register once you have $100,000 in sales in a specific time frame. Many states use that $100,000 (or 100 sales) threshold.
However, your main obligation is to charge tax when you ship to a state where you have nexus. To start, that means anywhere you have a physical presence. So those threshold you are referring to really come into play after you start making sales. But in the beginning, your business will be required to register for a sales tax permit in any state that you have an employee, including yourself, a warehouse, a storefront, inventory, etc. Usually, that'll just be one state to start.
So if you are physically located in the US and in a state other than New Hampshire, Oregon, Montana, Alaska, or Delaware (these states don't have sales tax), then your business would be obligated to register in that state and then begin collecting tax when you ship orders to that state. When you ship to other states, you do not need to charge tax until you either establish a physical presence in that state, or cross the economic nexus threshold set by that state.
In order to register for your sales tax permit, you can visit your state's department of revenue, taxation, or the equivalent department and it should be pretty straightforward on filling out the form to get your permit. My business does also help with this if you need, but I am trying to not self-promote here and I wouldn't recommend paying for someone else to do it as you get started unless you would really like the help.
Once you are registered, the state will send you information on how often they'd like you to file (usually annually or quarterly to start). Then they will let you know when your first filing will be due. Shopify provides you with both calculations when necessary (if set up properly) and reporting to make this process smooth, but again, you can hire a filing service like ours if you need. There are several others out in the marketplace and they all seem generally, pretty good in various ways.
To set up your state as taxable, once you have your permit go to your Shopify settings (settings -> Taxes and Duties -> United States -> Add Region -> Your State). You can test to make sure this is working by just putting something in your cart on your website and go to the checkout. Then put an Indiana address in the shipping part of your page and you should see estimated tax appear in the total. If you see that, you’re good to go and Shopify will be properly taxing when you ship to IN. Additionally, put in a non-IN address and you should not see any estimated tax.
Happy to help if you run into further issues. Best of luck as you get up and running.
Hi Matt,
I am having a similar issue. I need help from Shopify, I think, or else they need to change how this setup works for those using Shopify as a marketplace.
Here is my scenario. So, we run a marketplace off Shopify. We don't have enough sales to require a nexus (except our home state). We have "locations" set up in our system, because our vendors who sell on our marketplace, ship from there own warehouses to our customers. We are not affiliated with these locations, only have them set up so we know where to send the orders. To double confused things, we sell vitamins and supplements, which most states don't charge sales tax on at all, so either way, we aren't meeting nexus and they aren't taxable to begin with.
Shopify won't let me change the setting, and I can't get rid of this flag, there is nothing I can find that can get rid of it. I pray they aren't going to shut us down due to this flag.
When we started this company we thought we needed a nexus in every state, and signed up for them. Then proceeded to file taxes (like $.90 or $1.25 a month) and it was a major headache, then we found out we should never have been collecting taxes for our products due to the nature of the products and also because we didn't meet nexus in any state other than our own (we are required to have a home state nexus), even though our payments are super small. We are now currently in the process of shutting down all the unneeded nexus', so we don't have to file tiny tax deposits every month for all the states. It was a major headache, and we tried using TaxJar, but they screwed up everything and made it worse.
The issue is when you go to taxes in the admin section of Shopify, we get this yellow flag:
I have reviewed these 6 states and in none of them do we even come close to needing a nexus in those states (both due to the qty of orders, amounts of total sales, AND that our products aren't even taxable). They are however the places our vendors are located (due to their locations). We have about 6 set up now, and have another 50 vendors (and their warehouse "locations") to add. Once they are all there, we still won't make a nexus due to sales, qty of orders, and the products we sell being non-taxable.
How do I get Shopify to stop seeing the locations we have in there as our own company's nexus?
Also, is there a way to get a Sales report by state, but month? Because we are trying to fix what Tax Jar screwed up and it would be nice to be able to make a clean report when we are talking to the states to clear up the problems?
Any help is truly appreciated!
~Catherine
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