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?
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