Is anyone else having issues with Shopify not calculating out-of-state sales tax?

Scom24
Visitor
2 0 0

Pennsylvania is my where our physical location is.  Shopify is only charging 6% on Pennsylvania Residents and not on all the orders to another State.  According to Pennsylvania sales tax law every transaction no matter where to is taxed the 6%.  I have put in overrides and Shopify is not calculating the tax at the end of the transaction to states outside of Pennsylvania.  I cannot get support from Shopify as they circle back to the override which is in place.  I am now paying the sales tax on items I sold that were not charged so I am compliant.  I had to take down and deactivate my products until thsi is resolved.  I don't need a tax professional to tell me what tax to charge.  I need technical support so that the tax is taken out.  Does anyone else have this issue and how did they resolve it?

Reply 1 (1)

BreezyFile
Shopify Partner
21 1 1

Hey Scom24, 

Perhaps I can help with this.  I don't work for Shopify but I have been working in sales tax for a number of years now and am pretty familiar with how it works.  So, based on what I am seeing here, you only need to charge sales tax when you are shipping to PA because PA is your only nexus state.

 

When you ship out of state, you only need to collect if you have nexus in the states to where you are shipping.  Where the confusion might be coming into play is that PA is an "origin-based" state.  What that means is that when you ship items to different locations in PA, you need to charge the sales tax rate at the location where you are shipping from.  So if I am shipping from Philly to Pittsburgh, I need to charge the Philly rate, not the Pittsburgh rate.  In most other states, like Colorado for example, you charge the tax rate at the location you are shipping to.  So if I ship from Denver to Colorado Springs, I use the Colorado Springs rate, not the Denver rate.  So, you may have been told or read somewhere that you "always need to charge 6%" because you are shipping in an "origin-based" state.

However, the "situs" of the sale in sales tax is always based on where you ship to.  So if you ship from PA to CO and you have nexus in PA but not CO, the "sale" technically occurred in CO. Because you don't have nexus in CO, you do not need to collect tax and you do not owe the state of PA anything for that sale.

 

I hope that clears things up! Let me know if you have any further questions.

 

Matt

matt@breezyfile.com