SALES TAX BOOT CAMP FOR SHOPIFY SELLERS

Your Guide to Getting Sales Tax Compliantwith LIZZY GREENBURG

Put a lid on sales tax.

GOALS

• Cover some tax basics• Connect sales tax to Shopify• Share next steps• Resources for help in the future• Questions!! (use the chat section to the left)

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QUICK INTRO:

• Passion: using tech to solve problems for small business!

• Shopify Seller since 2011

• CA and TX Sales Tax payer since 2004

• Not a CPA or tax professional• Talked to thousands of online

sellers, pros, auditors, states

• Here to help you make informed decisions

WHO WE TALK WITH EVERY DAY

• People making a living online• Multi-channel sellers• Want to be educated• Trying to determine where they have nexus• Sales tax is being collected in different accounts• Filing returns is a frustrating, waste of time

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”“

“I want sales tax to go away!”

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– Average TaxJar Customer

SALES TAX BASICS

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CHAOS PREVAILS

• No federal laws or governing body (yet)

• 45 states (and DC) = 46 sets of laws• Nexus• Taxability• Rates• Due dates

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WHAT’S TAXABLE?

• Tangible items are taxable• Common exceptions are clothing and food

• Services are mostly not taxable• Are the tides changing?

• Shipping, gift wrapping can be taxable

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PASS-THROUGH TAX

• Pay what you collect

• Never pay out of pocket!

• Sellers are ‘collection agents’

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AUTOMATE!

Starting is the hardest part

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WHAT THE HECK IS NEXUS?

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NEXUS IS WHEN/WHY YOU CARE

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A presence / connection in a state that’s significant enough for you to be

required to comply with their sales tax law

WHAT’S THE RIGHT TIME TO COLLECT SALES TAX?

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GOLDEN RULE OF COLLECTION

Collect sales tax when the item sold is shipped to a state where you have nexus

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MEET JOE SELLER

• Based in Akron, OH

• Only has nexus in OH

• Complying in 1 state

Akron, OH Lakewood, OH

Collect sales tax

NEXUS SALE

Collect sales tax

REMOTE SALE

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Boston, MAAkron, OH

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HOW MUCH SALES TAXSHOULD I COLLECT?

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COLLECTION LOGIC: SOURCING

• State where item is shipped determines tax rate

• Tax rate usually = sum of applicable rates• State• Local• Other (i.e., education, transportation)

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ORIGIN VS. DESTINATION SOURCING

• Origin-based state• Tax rate = seller’s location• One rate for entire state

• Destination-based state• Tax rate = where item is shipped• Variable rate

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RUNNING A SHOPIFY STORE& SALES TAX

TAX COLLECTION IN SHOPIFY

• Shopify has a free tax collection service• Can collect in multiple states• Tax collection is based on zip code

• To activate, go to SETTINGS > TAXES > TAX RATES• Enter your location’s city and zip• Be sure to collect in every state you have nexus

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RECOMMENDED SETTINGS• Select “I want to specify taxes automatically.”

• Separate sales tax from the cost of the item

• (If outside the US) You can select ‘charge taxes on shipping’ where applicable

• Set your tax overrides• Treat clothing and food differently• Avoid collecting tax when you don’t have to• You can even specify a tax rate by ‘collection’

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If You’re selling multi-channel on Amazon...• YOU have to enable collection in Seller Central

• Amazon will NOT tell sellers• How to collect in FBA states (TaxJar will)• Where to collect (TaxJar will)

• Easy to collect ‘wrong’• Collecting only state tax in a destination-based state

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FILING RETURNS

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HOW OFTEN DO I FILE?

● Filing deadlines usually tied to sales volume• The more you collect, the more often you pay

● Frequencies: annual, semi-annual, quarterly, monthly

● Deadlines typically fall on 15-30th of the month

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FILING TO THE STATES

• Combine and file a single return per state• Not separate returns per channel

• File zero returns!• When you’ve collected $0 in sales tax

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PAY ON TIME = $$

Some states have discountsfor on-time payment

• Generally between 1-2%• It’s free money!

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PAY MORE IF YOU’RE LATE

All states have penalties for late payment

• Booo!• Late payment charges• Interest on what wasn’t paid

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FILING IN DESTINATION STATES• Huge pain!

• States rely on you to divide up the money collected

• Calculate taxable sales & sales tax collected by jurisdiction

• Gets worse if you’re multi-channel

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HOW ARE YOU FEELING?

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WHAT DO I DO NOW?

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Head-in-the-sand is not an option

Best effort > no effort

Don’t drain your resources trying to comply

HOW DO I GET STARTED?

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START COLLECTING AT HOME

1. Comply in your home state• Register for a sales tax license• Enable sales tax collection• Pay and file

2. Think about your nexus...

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Sign Up for a Free 30-Day Trial

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WHAT ARE YOUR SALES & TAXES COLLECTED BY STATE?

HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION?

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WHERE DO YOU HAVE NEXUS?

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INTEGRATIONS

Thousands of happy customers, including...

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Helpful resources

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youtube.com/taxjarFor visual learners

salestaxcommunity.comTalk with 5,000 other store owners and tax pros!

blog.taxjar.comContent just for ecommerce & sales tax

CALL US!

855-800-6681

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• 30-day free trial (no credit card required)

• Monthly or annual subscriptions

• Pricing based on transaction volume

• Starts at $19/month for 1k transactions

• $19.95 per AutoFile return

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Start a FREE 30-Day trial

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WE LOVE QUESTIONS!

WHAT ARE YOUR SALES & TAXES COLLECTED BY STATE?