Sales Tax Boot Camp for Shopify Sellers

SALES TAX BOOT CAMP FOR SHOPIFY SELLERS
Your Guide to Getting Sales Tax Compliant
with 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)
Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 2

3
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

”
“
“I want sales tax
to go away!”
3/2/16Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 5
– Average TaxJar Customer

SALES TAX BASICS

CHAOS PREVAILS
• No federal laws or governing body (yet)
• 45 states (and DC) = 46 sets of laws
• Nexus
• Taxability
• Rates
• Due dates

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

PASS-THROUGH TAX
• Pay what you collect
• Never pay out of pocket!
• Sellers are ‘collection agents’

AUTOMATE!
Starting is the hardest part

WHAT THE HECK IS NEXUS?

NEXUS IS WHEN/WHY YOU CARE
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?

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

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
3/2/16Copyright © 2016 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
Boston, MAAkron, OH

Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.
HOW MUCH SALES TAX
SHOULD I COLLECT?

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)

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

Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc. 37
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

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’

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

FILING RETURNS
Copyright © 2015 TaxJar. TaxJar is a trademark of TPS Unlimited, Inc.

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

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

PAY ON TIME = $$
Some states have discounts
for on-time payment
• Generally between 1-2%
• It’s free money!

PAY MORE IF YOU’RE LATE
All states have penalties for late payment
• Booo!
• Late payment charges
• Interest on what wasn’t paid

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

HOW ARE YOU FEELING?

WHAT DO I DO NOW?

Head-in-the-sand is not an option

Don’t drain your
resources trying to
comply

HOW DO I GET STARTED?

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...

WHAT ARE YOUR SALES & TAXES COLLECTED BY STATE?

HOW MUCH SALES TAX DID YOU COLLECT BY JURISDICTION?

Thousands of happy customers, including...

Helpful resources
64
youtube.com/taxjar
For visual learners
salestaxcommunity.com
Talk with 5,000 other store owners and tax pros!
blog.taxjar.com
Content just for ecommerce & sales tax

CALL US!
855-800-6681

• 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
Start a FREE 30-Day trial

WE LOVE QUESTIONS!

Sales Tax Boot Camp for Shopify Sellers

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