sales tax setup

[lgrantsimmons]

The examples don't show me how to set a different tax rate for each state. It seems my Zone = United States with the ALL ZONES selected as an option. This displays in the Tax Zone window as:

Country Zone

United States All zones

 

Displaying 1 to 1 (of 1 countries)

 

So, how and where do I plug in each state tax rate? [When I tried making a folder under Zones for each state, that allowed me to go into the Tax Rate window and create one for each state. BUT when I made a purchase, all the tax rates appeared and were combined to charge a total of over 300% tax.]

[lgrantsimmons]

The examples don't show me how to set a different tax rate for each state. It seems my Zone = United States with the ALL ZONES selected as an option. This displays in the Tax Zone window as:

Country...................Zone

United States...........All zones

 

Displaying 1 to 1 (of 1 countries)

 

So, how and where do I plug in each state tax rate? [When I tried making a folder under Zones for each state, that allowed me to go into the Tax Rate window and create one for each state. BUT when I made a purchase, all the tax rates appeared and were combined to charge a total of over 300% tax.]

 

NO REPLIES - so I tried adding each state as a TAX CLASS. This allowed me to set up their individual tax % in the TAX RATES section. I wasn't sure what PRIORITY to use, so I went with 0. This seemed to look right and started to make sense......UNTIL I tried to buy something and there was no tax being charged at all. So, then I went to look at the CATALOG/CATEGORIES/PRODUCTS listing and saw that I had to set the TAX CLASS and not the tax zone. I've been told I have to collect tax based on the buyers residence, so I can't choose one state! NOW WHAT?

[MrPhil]

Note that you need to collect sales tax for a given state ONLY if you have a nexus (physical presence) in that state. You wouldn't be collecting sales tax for all states (not yet, anyway). Maybe you can get it configured just for your state?

[lgrantsimmons]

There is no physical location - this is entirely online. It is for e-publications for download. The Corporation is registered in Delaware which has no sales tax, but I've gotten some conflicting information from State tax offices saying I need to collect tax for products sold to their residents :(

[MrPhil]

As tax laws currently stand, you need to collect state sales tax only if you are "in" that state in some form. You're incorporated in Delaware, so you might have had to collect there (if they had a sales tax). If your place of business (world headquarters, even if it's just a corner of the bedroom!) is in another state, you will need to collect sales tax on sales to customers in that state. You don't have brick-and-mortar stores or distribution centers in any state, so nothing there. If you have affiliate programs or drop-ship centers in other states, you may have to collect there.

 

Customers are supposed to pay sales tax (collected by the merchant) or the equivalent amount in "use tax" (usually reported and paid on their income tax form) on all purchases, no matter where they were bought, if the proper sales tax was not paid. That's probably what the sales tax agencies were trying to tell you. As it now stands, you can sell to someone in another state without having to collect and remit sales tax for that state*. Your customers are legally responsible for voluntarily reporting purchases and paying the correct amount of "use tax". There is a movement afoot to streamline sales tax rules and methods so that you would collect for all states, but it's not yet law.

 

* A few states have cross-collection agreements with neighboring states, for example, New York with New Jersey and Connecticut, but it only applies in certain circumstances. Your state tax agency should be telling you if such applies to you.

 

IANAL, nor am I a tax consultant or accountant. Consult with your own state tax authorities, as well as any state in which you have some sort of business presence (affiliates, brick and mortar stores, distribution centers, drop-shippers) to see if you have to collect and remit taxes there.

[lgrantsimmons]

As tax laws currently stand, you need to collect state sales tax only if you are "in" that state in some form. You're incorporated in Delaware, so you might have had to collect there (if they had a sales tax). If your place of business (world headquarters, even if it's just a corner of the bedroom!) is in another state, you will need to collect sales tax on sales to customers in that state. You don't have brick-and-mortar stores or distribution centers in any state, so nothing there. If you have affiliate programs or drop-ship centers in other states, you may have to collect there.

 

Customers are supposed to pay sales tax (collected by the merchant) or the equivalent amount in "use tax" (usually reported and paid on their income tax form) on all purchases, no matter where they were bought, if the proper sales tax was not paid. That's probably what the sales tax agencies were trying to tell you. As it now stands, you can sell to someone in another state without having to collect and remit sales tax for that state*. Your customers are legally responsible for voluntarily reporting purchases and paying the correct amount of "use tax". There is a movement afoot to streamline sales tax rules and methods so that you would collect for all states, but it's not yet law.

 

* A few states have cross-collection agreements with neighboring states, for example, New York with New Jersey and Connecticut, but it only applies in certain circumstances. Your state tax agency should be telling you if such applies to you.

 

IANAL, nor am I a tax consultant or accountant. Consult with your own state tax authorities, as well as any state in which you have some sort of business presence (affiliates, brick and mortar stores, distribution centers, drop-shippers) to see if you have to collect and remit taxes there.

[lgrantsimmons]

THANKS FOR YOUR CLARIFICATION! Your comments are well received and greatly appreciated.