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1 tax rate for 5 states


dlcmpls

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Posted

I need to have one tax rate for 5 adjoining states.

 

How do I do this?

 

I want any customer from MN, IA, WI, ND or SD to be charged the same tax. All other customers won't be charged tax.

Posted

I need to have one tax rate for 5 adjoining states.

 

How do I do this?

 

I want any customer from MN, IA, WI, ND or SD to be charged the same tax. All other customers won't be charged tax.

 

 

Ok I figured this out on my own with a clue from an online tutorial.

 

The trick is to have 1 Tax Class, which I called "Taxable Goods". Assign that tax class to all taxable items that you sell.

 

Create 1 Tax Rate for each State and use the Taxable Goods class for each of your new State Tax Rates. Each Tax Rate should use the same amount - in my case 7.625%.

 

So I now have 1 Tax Class called "Taxable Goods" and 5 Tax Rates:

 

MN - assigned to the Taxable Goods Class

IA - assigned to the Taxable Goods Class

WI - assigned to the Taxable Goods Class

ND - assigned to the Taxable Goods Class

SD - assigned to the Taxable Goods Class

 

Now, whenever a customer has a Shipping Address in one of the above states, they get charged a sales tax of 7.625%. And the tax amount is the same for all 5 states.

 

This seems to work, but I'd appreciate feedback as to any possible pitfalls in regard to what I've done.

Posted

Dave,

 

You may want to verify that you have to collect taxes in those 5 states. As I understand it, you would only collect taxes in the State of which you are a registered business. But, I could be wrong if the tax laws have changed recently.

 

 

 

Chris

Posted

If the OP has a "nexus" in those states (physical presence), they would need to collect sales taxes. Some states (NY and NJ come to mind) have bilateral or regional agreements to collect sales tax on cross-border sales in certain circumstances. Nevertheless, your advice to double-check whether they actually are required to do so would be good.

 

As far as the mechanics of this go, I would assume that the OP would have to treat these 5 states as 5 separate zones, and set a tax rate (that happens to be the same) across all of them. It seems a bit odd that they would collect the same rate on all, rather than each state's individual rate, but maybe that's what the interstate agreement calls for...

Posted

Dave,

 

You may want to verify that you have to collect taxes in those 5 states. As I understand it, you would only collect taxes in the State of which you are a registered business. But, I could be wrong if the tax laws have changed recently.

 

 

 

Chris

Hi Chris. Thanks for pointing that out. I'm just going by my what my client tells me and relying on them to have the right info.

 

I'm hoping I have the 5 state tax set up right. It's working properly so I think I'm good to go, but if you have any feedback about my implementation method, I'd like to hear it!

Posted

Phil,

 

That is true, however the OP did not state that so I assumed it would be a normal tax scenario.

 

 

Dave,

 

If your customer does not have a physical store in all 5 states, then I believe they do not collect taxes from those states. You should check with your client and state tax laws governing the collection of taxes on internet sales. Your client would be in a world of hurt if the IRS got involved.

 

 

Chris

Posted

Thanks for all the Tax advice!

 

Just to direct things back to my original question...does anyone have feedback in regard to how I've set up my tax situation. As I said earlier it seems to be working so for now I think I'm good, but I'd appreciate any feedback on my set up (not on how/whether tax is required ;).

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