# E-commerce sales tax



## jackfruit94112 (Apr 9, 2011)

Hi, 

I live in California and do e-commerce T-shirts, How are we going to apply the sales tax for different state ?
I mean do we use a software/ magento--something that do it for us, or we just hit the tax for everybody ( I guess this is a wrong way). I mean it's e-commerce, so it would have to apply right away in the cart and we should not change anything later manually.

Please help. Thank you !


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## tcrowder (Apr 27, 2006)

You can only collect tax for sales in the state you register your business in. If you ship out of state, you have to pay a Use Tax which is paid to the state (if you are buying wholesale).


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## greyhorsewoman (Jul 19, 2007)

*Use tax* applies to the PURCHASER only. Example: If you buy a heat press from a company out of state and you do not pay sales tax, YOUR state wants you to tell them that and pay sales tax in YOUR state. This does not apply to items purchased to create your product, assuming you collect tax at the time of sale.

For the consumer this is difficult to monitor, but for businesses, many state revenue depts note whether or not you claim 'use tax' when filing your sales tax reports and it could trigger an audit.

You need only collect sales tax on the sales within your state (if sales tax applies to that purchase, clothing is exempt in some states).


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## splathead (Dec 4, 2005)

You only collect sales tax in states where you have a physical location/operation. You don't collect in any other state. The purchaser is responsible to file sales/use tax in their own state.


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## FriendlyFire (Nov 13, 2009)

The previous posts are all correct. I've had customers incorporate the tax into their normal price so that everyone is paying a little extra to offset the cost of sales tax. Some also incorporate shipping into the cost and advertise it as FREE SHIPPING. Whatever you decide to do, make sure you have a paper trail. Audits are not your friend.


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## splathead (Dec 4, 2005)

FriendlyFire said:


> I've had customers incorporate the tax into their normal price so that everyone is paying a little extra to offset the cost of sales tax.


Don't do it this way though:

1. It's illegal in some states to build in sales tax into the purchase price. 

2. It results in your product having a higher sale price than necessary. 

3. Your out of state buyers are being double taxed.


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## jackfruit94112 (Apr 9, 2011)

Thanks all for the reply.
Need to summarize the answer, please help.

I live in California, with sales tax almost 10%, so in my e-commerce, I will set it up CA tax only for those CA customers ?
All of these taxes from my online CA customers, I have to pay back to State. So I hold the tax and paid them all once it's time to pay.

About the non California customers ( not sure which state charge sales tax/ which are not)--this is e-commerce, if they don't pay the tax, I still have to pay the tax to State of my business with these purchase ? That means my profit is less. Is it what happens ? Or I don't pay to the State ?

Thanks all...need to educate myself more about this legal thing.


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## splathead (Dec 4, 2005)

jackfruit94112 said:


> About the non California customers ( not sure which state charge sales tax/ which are not)--this is e-commerce, if they don't pay the tax, I still have to pay the tax to State of my business with these purchase ? That means my profit is less. Is it what happens ? Or I don't pay to the State ?


No. You don't pay any sales tax for any sales outside of CA, whether the buyer pays their use tax or not (you'll never know if they did anyway).

So when you ship out of state, don't collect sales tax, and you're done. You'll not have to revisit that sale again.


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## greyhorsewoman (Jul 19, 2007)

Additionally, it is not LEGAL to collect sales tax unless you hold a sales tax license. So, you will need to get one for California (and submit it monthly, quarterly or annually as required). As you are NOT required to obtain one for the other 49 states, you cannot legally collect sales tax in those sales.


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## tcrowder (Apr 27, 2006)

jackfruit94112 said:


> Thanks all...need to educate myself more about this legal thing.


You know, it took me all of about 15 seconds to find this doing a Yahoo search:

Guidelines/Manuals - Sales & Use Tax, Excise Taxes, Fuel Taxes, & Environmental Fees


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## splathead (Dec 4, 2005)

tcrowder said:


> You know, it took me all of about 15 seconds to find this doing a Yahoo search:


Surely you jest. If I was faced with reading a 22 chapter manual, some chapters over 100 pages long, I would first ask the question here too.


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## tcrowder (Apr 27, 2006)

splathead said:


> Surely you jest. If I was faced with reading a 22 chapter manual, some chapters over 100 pages long, I would first ask the question here too.



Sure, and we all know the wonderful legal advice you get on a t-shirt forum. If people are serious about going into business, they should get serious about doing their homework to do it right and getting answers from the proper source. I think the next time I go in for a follow up with my cancer doctor I'll ask him about the rattle in the front end of my wifes mustang.


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## royster13 (Aug 14, 2007)

But often "short and snappy" answers on an online forum miss big parts of the relevant regulations....Way better in the long run to do the legwork yourself......


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## tcrowder (Apr 27, 2006)

royster13 said:


> But often "short and snappy" answers on an online forum miss big parts of the relevant regulations....Way better in the long run to do the legwork yourself......


+1...... glad I'm not the only one to feel this way.


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## jackfruit94112 (Apr 9, 2011)

Thanks so much all..Joe, Grey, Terry.
Yes, I'll apply the business license. Otherwise we can't sell.
Thanks again


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## jackfruit94112 (Apr 9, 2011)

Hi,
Just remember another thing about this sales tax.
Does selling on ebay is the same thing ? Meaning just apply the sales taxes to all the California customers since my e-commerce is in CA ?
Thanks again.


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## greyhorsewoman (Jul 19, 2007)

Yes, ebay sales apply the same as website sales. 

And, yes, finding information by going to 'the source' makes sense. Every state has a website ... you can normally find a link to SALES & USE TAX and, many times, apply right there for a sales tax license.

California: http://www.taxes.ca.gov/Sales_and_Use_Tax/index.shtml


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## jackfruit94112 (Apr 9, 2011)

Hi all,
This is what the BOA reply to my question regarding sales tax----see below---
I live in California.
They do want me to charge sales tax to everybody since my ecommerce is in California. Is that what the real answer is ? 
============================================


Hello,

If you are making sales of tangible goods in California (even through
eBay) you are required to charge sales tax. Tax does apply to shipments
made directly out of state. 

A California seller's permit holder is responsible for collecting sale
tax for sales delivered in California. Sales tax applies to when and
where the delivery of sales took place. When and where payment is made
is not relevant.

In areas where retailers are engaged in business, they must collect the
statewide tax rate (8.25%) plus any applicable district taxes.

Or if they are not considered engaged in business in the district where
product is being sent by common carrier, they may charge the statewide
rate of 8.25% and the buyer must pay the difference in the form of 'use'
tax.

As a courtesy, most retailers charge their California consumers the rate
of tax charged in the customer's district to relieve them of any Use Tax
liability.

For tax rates by city or county, please visit our website:

California City and County Sales and Use Tax Rates - Board of Equalization 

For additional information (including the definition of "engaged in
business"), please refer to the following:

Publication 44, "Tax Tips For District Taxes" 
Publication 105, "District Taxes And Delivered Sales" 
Here is a link to our "Sales and Use Tax Publications" Page:

Sales & Use Tax Publications - Numerical Listing - Board of Equalization 

Thank you for contacting the Board of Equalization's Taxpayers
Information Section. The answer given is intended to provide general
information and will not serve as a basis for relief of liability under
Revenue and Taxation Code section


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## splathead (Dec 4, 2005)

jackfruit94112 said:


> Hi all,
> This is what the BOA reply to my question regarding sales tax----see below---
> I live in California.
> They do want me to charge sales tax to everybody since my ecommerce is in California. Is that what the real answer is ?
> ============================================


That's not how i read their note to you. They say if you ship out of state, there is no tax collected. See #'s 9 & 10 Tax Rate FAQ for Sales and Use Tax - Board of Equalization


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## jackfruit94112 (Apr 9, 2011)

Ok, thanks Joe.

It's hard to read the legal word !


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