Does selling commissioned art require state tax collection?

[JLStudio]

I'm an artist and I have a shopify store. I sell prints, originals, but most of my orders come from custom dog pet portrait orders. So they'll place an order for a custom watercolor pet portrait, and i'll paint it. The taxes for this have been quite confusing. I'm based in california, and I notice that I'm only charging tax for orders in california. If they're based outside of California zero tax is being charged. I thought that for art you were supposed to charge tax for the state you're selling in. Is this true? I don't have nexus in any other state - so should I just let it be? They get a commission tax free? Am I responsible for paying this down the line out of my own pocket? 

[Sheesh_b]

Hi @JLStudio 

You can set taxes state-wise as per selected country in your store settings under 'Texes and Duties'.

If you can't find it or not being able to fix, kindly let us know.

Thanks

Sheesh B

[JLStudio]

Yes, I'm aware of that. But I don't have nexus in any other state, so I don't need to collect Texas state tax there for example, and have to file also in texas. That would make filing my taxes that much more complicated. 

[davidyu]

As an artist based in California, you're correct in collecting sales tax for orders within California. However, for orders outside of California, the requirement to collect sales tax from customers depends on whether you meet the criteria for having an economic nexus in those other states. This typically involves reaching a certain threshold of sales or transactions in a state within a given year.

Many states have established specific thresholds for out-of-state sellers, which, when exceeded, require those sellers to register and collect sales tax in that state. These thresholds vary but are commonly set at $100,000 in sales or 200 transactions within a state per year​​​​.

To ensure compliance and minimize risks, it's crucial to stay organized and possibly consult with a tax professional. Risks of mismanaging sales tax include late fees, interest, and in some states, more severe penalties​​. To set up your ecommerce sales tax correctly, you should determine if you meet nexus criteria in any state, understand how sales tax works in those states, register for a sales tax permit if necessary, and set up a system to calculate, collect, and remit the correct taxes​​.

Best of luck to you and happy painting!

[Shay]

Hey @JLStudio - I recommend taking a look at this white paper from Avalara that goes over the ins and out of destination/origin based tax rates. California is probably one of the more complex states to sell from as it is one of the few hybrid states. Meaning, some taxes are origin based (where the seller is located) and others are destination based (where the customer is located): Avalara - Origin sales tax vs destination.

Because California is a hybrid state I strongly recommend connecting with a registered tax professional to help you better understand the ins and outs of your taxes and where and what to charge.