We are just in the process of setting up our shop and are not "open" yet. I've been reading a lot of tax posts here as well as outside articles but want to be sure I understand.
Our nexus is just California (home-based business making and selling art pieces and jewelry). We have a CA seller's permit. We also have a business license from our city. I know that we must charge tax when we sell and ship to people in CA, but what about to people in other states? And if yes, do we have to have a seller's permit in every state we might sell/ship to? That sounds unreasonable.
Finally, am I correct that we don't have to collect and remit use tax if our sales threshold for a particular state is under $500,000?
Hyde here from Shopify. Excellent question!
It's great that you know that your nexus is in California because from there you can determine how your taxes may be charged by using our state tax reference document here. This is no replacement for your own local tax authority's information, so definitely consult with them too. There's also a fantastic document on the subject here.
Taxes in the states are generally charged depending on where your state business nexus is. Each state has different tax laws, but the general rule is that a state is either a Destination State (meaning tax is charged based on where you are shipping to) or an Origin State (meaning tax is charged based on where you are shipping from😞
When it comes to California, our system automatically sets your store to charge according to destination rules when you enter your tax registration information for California. However, depending on how you're registered with your state, you may need to change this to a hybrid. Either way, you do not need a seller's permit for every state you might ship to, but here is more detail about how it is all broken down:
The full document is available here. In relation to your question about the tax thresholds, you would need to check with your tax authority, because this may once again vary depending on whether you're classified as a destination or hybrid nexus based on your registration.
I hope this all helps!
All the best, Hyde.
Connect your PayPal account to allow your customers to checkout using the PayPal gateway a...By Ollie Jul 28, 2022