If you are a US merchant, you are most likely required to pay sales tax according to state and local laws. You can set up your Store so that you are able to collect, report, and file sales tax properly.
What taxes should I pay?
Sales tax apply to the sale of most products and some services in most states. The rates and rules notably differ from state to state, though. For example, California has the highest state-level sales tax rate at 7.5 percent. The lowest sales tax is in Colorado, which has a rate of 2.9 percent.
In order to know what taxes apply to your business, please use this State Sales Tax Map, and click your state on the map.
Collect Automatic Sales Tax
To enable automatic sales tax:
- Go to the Store Menu, click Settings, and then click General.
- Click Store Profile and add your company address.
- Go to Settings, and click Taxes.
- Enable automatic tax calculations.
Once automatic tax rates are enabled, your store will charge a precise tax rate depending on where you and your customer are located.
How the Automatic Sales Tax Tool Works
In general, if your business has a physical presence in a state (also known as nexus), such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. Tax rates normally vary depending on the customer location. Additionally, state laws change from time to time and tax rates get updated.
It may be quite challenging to take into account tax rates for all locations and manually track tax regulations updates. That is why we are offering you an easy way—our automatic tax rates feature. When automatic tax rates are enabled:
- Store automatically calculates tax rates depending on you state tax law, store, and customer location.
- Store stays up to date on the tax law: once tax laws are changed in your state, county, or even city government, your store will know the new rules and apply them at checkout. No actions are required on your side.
If our automatic tax feature does not cover your needs entirely (that is, you need to mark some of your products as tax free), you can use an advanced rates setup. Store also allows you to set up taxes manually.
To manually set up taxes:
- Go to the Store Menu, click Settings, and then click Taxes.
- Click Manage tax rates to be able to add rates manually.
Tax Exempt Customers
To exempt some of our customers from taxes, mark them as tax exempt on the Customers page in your Store Menu.
Set Up Multi-State Nexus
By default, Store detects your nexus state from your store address and, once you have Automatic Taxes enabled, it will calculate tax rates accordingly. If your business is distributed over several states, that is, you have multi-state sales tax nexus—it is also possible to set up your taxes so that your customers from the other nexus states will be charged proper sales tax.
- To enable Automatic Taxes, go to the Store Menu, click Settings, and then click Taxes. Once the option is enabled, your store will automatically calculate and charge sales tax on checkout.
- Go to the Store Menu, and click Apps.
- Click TaxJar, and click Install.
- Open the TaxJar dashboard.
- Go to Account, and click SmartCalcs API.
- To allow Store to use your TaxJar nexus address settings, enable the Use Personalized Sales Tax Calculations in your Store option.
- On the same page, go to the Nexus Address Configuration and add your store nexuses.
You have multi-state nexus set up and Store will automatically calculate tax rates according to your nexus states.
What is Nexus?
Generally, you only have to collect and report Sales tax in a state, where your business resides. But the more precise rule is if your company has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers in that state. In legal terms, this physical presence is known as a nexus. Each state defines nexus differently, but all agree that if you have a store or office of some sort, a sales tax nexus exists, and you need to charge and report tax there. If you are uncertain whether or not your business qualifies as a physical presence, you should contact your state's revenue agency. For more information, see the following: http://blog.taxjar.com/sales-tax-nexus-definition.
Reporting and Filing Sales Tax Returns
If you sell taxable products, you must report taxes and file tax returns with a state and locality, in which you are collecting sales tax. The frequency of tax reports and returns depends on the volume of your sales. In most states, you must prepare tax returns monthly if you have a high volume of sales, but at least quarterly in almost every state.
TaxJar app for Store allows you to automate tax reporting which means TaxJar will automatically report and file your sales tax returns to the state for you.
- Make sure your Store charges every customer a proper tax amount. The easiest way to do that is to enable Automatic Taxes in the Store Menu. Once enabled, your store will automatically calculate and charge the appropriate sales tax on checkout.
- Install the TaxJar application from the Store App Market.
- Once installed, the app will automatically start synchronizing your sales and will guide you through any additional steps.
- While it synchronizes your sales, open your TaxJar account settings and fill in your business profile to let TaxJar automate everything for you.
- When TaxJar finishes exporting your sales, follow the instructions they provide to generate tax reports and enable automatic filing and reminders.
Non-Taxable Items in Store
If there are non-taxable products in your store, you can set up a zero tax for them using manual tax rates option. You can either exclude the product from tax calculation or create a special 0% tax rate and apply it to the product.
To manage the manually configured tax rates per product:
- Go to the Store Menu, click Catalog, and then click Products.
- Go to the individual product page, and click the Tax and shipping tab.
- Choose tax rates you want to enable or disable for that product.