Suggestion: Sales Tax collection in the USA

Geert Middelman

I know I might not make friends by requesting this, but I do have to comply to the US law with my small LEGO parts business.

Is it possible to implement a Sales Tax collection system for the individual states in the US as well? Seeing an implementation in the EU is done, the step up to do it for the US should be doable.

For us in the US it is mandatory to collect sales tax after certain thresholds, or for some states, at the first order. eBay and 'the other side' handle sales tax for us, which is convenient and ensures I'm complying to the rules.

Thanks for considering.

Calibrick

Hi Geert! We can already auto-collect sales tax and report it ourselves in BO based on zip code entries... the only real manual thing to track is when we hit the state-by-state thresholds for collecting outside our state (or KS for any order because they dare to be different, even if we're talking less than $1 over a year, sigh).

I'm with you, I'm all about being legal - anyone who beats us up for doing things the right way and following the rules, well, that's just not remotely cool. Everyone, you do you, it's all good! :-)

I think you're really asking if BO can do this on our behalf and report/pay to the individual states for us (i.e., figuring out our own states, then the thresholds to collect for other states, e.g., if you're not CA, you have to start collecting at 200 orders or $10k, whichever comes first)?

The EU has a big plus - it's consistent as near as I can tell. I THINK.

Unfortunately we in the US are NOT with differing state-to-state thresholds of when to even collect if you sell to that state, and then INTERNAL to a state, e.g., if you only have to collect state-level plus city/county for your own county or if you have to collect varying rates for all counties (KS), which in my humble opinion would make this really hard for Lawrence to track and code... eBay likely has numerous developers and is proessing millions of dollars a year. I don't think BO is, by comparison (I'm just guessing) or has those types of resources available.

I wish to goodness we could have a Federal consistent law and approach on this though (something you won't hear me say super often, lol)!

Geert Middelman

Exactly! I've got it set up for Arkansas, by zip code (which is not 100% accurate, as zip codes cross towns), but to do it right nationally i need to set up a nexus in Kansas, and looking at last years' sales also in NY and CA. That threshold of 200 orders is different state by state as well, some are 0, some are 200, some is the monetary value.

So indeed, what I'm asking for is a full blown - do it on our behalf -, similar to what eBay and BL are doing.

Graham

@Geert Middelman

"Let sleeping dogs lie" collect and report sales and pay the taxes due on in-state sales. Brickowl is based 100% in UK (AFAIK) I just can't see tax collector from Kansas checking BrickOwl data to find you. Or don't ship to Kansas?

Calibrick

Geert, I've worked around all of this using Excel - one of my charts is sales by state which then highlights it when I hit the threshold (fortunately, I have yet to hit one even with last year's crazy sales (though TX came close) - since I'm in CA already, a big chunk of my sales are CA - likely because of shared zones, shipping costs run cheaper). Have you considered something like that in the interim? My workbook also auto-calcs sales tax collection based on my nexus and prepopulates a facsimile of our state's franchise tax board reporting form (as well as a ton of Federal stuff).

nita_rae

@Calibrick

The problem with zip-codes (as noted above) is that zip-code boundaries are drawn where the post office wants them to be, and they do not coincide with county boundaries. IOW, one zip can cross between two zip codes. The county I live in has two post offices, but parts are covered by 4 or 5 zip codes. One the local post offices crosses into an adjacent county.

In Florida, there is a state tax rate (6%) then a county optional surtax (that varies from 0% to 1.5%). So people living in one zip code, might two different sales tax rates. The only proper way is to know the county of each physical address. It's a mess. Is shipping taxable or not ? DOR told me that if I only offer shipping by one carrier (USPS) then it is taxable, but if I offered a choice of carriers (like USPS and UPS) then shipping is not taxable. Fun times.

Calibrick

I've been fortunate in my area of California - multiple zips in my city-level tax added to the county and state level tax, but no multiple zip codes across unique tax boundaries... (thank goodness!).

In CA, we're only required to collect state-level tax across the state, then for our own city, collect city/county tax on top that. So for my few Chula Vista (a city part of San Diego county, but a separate incorporated city) orders, I collect and report city, county, and state taxes from them. If someone from any other city in the state buys (e.g., Sacramento, Irvine), I collect state taxes ONLY, thank goodness. They made it a ton easier on us businesses. It was the same when I ran a collectible card game business a few decades back, also.

FL makes you collect tax for counties and cities you do not have a physical presence in (above and beyond state tax collection)? That's CRAZY. I can't imagine what a mess reporting time is in January for you! :-(

I keep an excel workbook that looks at my downloaded BO data, then aggregates orders by state so I can keep an eye on Nexuses... luckily, I've been small enough to not have to worry about it yet. 80% of my orders seem to be here in California, likely because of the cheaper shipping (since they're likely Zone 1 or 2 from me), and places I sell well at such as Texas haven't broken the Nexus barrier yet. Kansas doesn't seem to want to buy from me, so I've dodged that waste of energy so far (I can see my wasting my time and theirs reporting pennies, for goodness' sake <s>).

Personally, I find this one of those rare scenarios where Federal law could be potentially helpful by standardizing internet sales tax collection requirements across the states - that would then allow places smaller than Amazon and Walmart to automate tax collection and reporting WAY easier.

Calibrick

Re taxable shipping, I've always been told that shipping is not taxable and I've only charged tax on my actual product sold - I use USPS exclusively, which is a Federal service. You don't tax Federal services, as they are not-for profit.

HeartlandBrix

Just chiming in on @Calibrick's statement re: taxable shipping. Like sales tax, this might vary by state. I'm located in Kansas, and our state law requires me to collect tax on shipping, too, regardless of the carrier: "If the retailer and buyer are in Kansas, Kansas sales tax is due on a retail sale (including shipping and handling charges), whether that sale is made in person, by phone, fax or the Internet." The only exception would be if I was a mailer of mass-market print media such as magazines or "junk" mail.

Calibrick

Ahhh maybe that is a CA thing then. Interesting!

nita_rae

@Calibrick USPS divides their services into two major categories ... one is market competitive and the other is the one they hold monopoly on. I agree with you about the monopoly, but the part where they are market competitive is just like UPS, FedEx, DHL, or anyone else that wants to get into the business. FCPS, PM, etc, are all market competitive.

nita_rae

BTW, I was digging thru Stripe pages last night, and they offer sales tax calculation (based on the destination address). But the prices they charge are a bit steep for our business model. And that does not handle collection/remittance, just the calculation.

Geert Middelman

I'm looking back at last year right now, if I exclude the remittance done by the other marketplaces, I have two states where I am to collect sales tax. New York, their threshold is 100 transactions, and my home state obviously, for which I am collecting sales tax.

Now if I want to do it perfect, I need to set up a Nexus in NY state, and collect sales tax. Next year I might have to add FL and NY, and possible KS.

I'm not sure if thats a burden I would like to carry, if I cross the 100 or 200 transaction threshold on multiple states I might have to pause or hold selling to those states altogether, which would be a huge shame.

nita_rae

> I might have to pause or hold selling to those states altogether, which would be a huge shame.

How would you turn on or off individual states ?

Calibrick

I do not believe you can turn off individual states here in BO, I just looked at our shipping options. Unless you convince the admin to add a subcategory under US, listing every state (for optional use)? Just to make it more interesting, some states go with whatever is HIGHER of the two thresholds: 100 orders or $10k. So you could have 300 orders, but if you don't break $10k, they don't expect you to collect and report tax for them.

It's super not-fun to sort this all out. :-(

nita_rae

@Calibrick The problem with any sales tax collection, is that is has to be based on a specific address, not merely the state. In Florida, sales tax rate varies by counties, and possibly one or two cities have a surtax, so it gets messy. I think NYC may have a local surtax as well. It's more complicated than knowing the state or the zip-code.

Graham

@Geert Middelman

looks like you answered your question. Unless either the IRS or individual states go after BrickOwl as a market place facilitator, which as BrickOwl is based solely in UK is highly unlikely. It would fall upon individual store owners to comply with setting up a Nexus and collecting taxes in the relevant states.

However from my earlier research I understood New York to be $500,000 AND 100 transactions (not OR) - unless all your orders were over $5000 each!

https://www.avalara.com/us/en/learn/guides/state-by-state-guide-economic-nexus-laws-b.html?

iOne

This is a case where I wish the shippers would handle this.

The store owner would declare to UPS, FexEx or USPS the taxable value of the purchase along with the category (food, non-food, medicine).

Then, have the shipper work out the tax due and fold it into the shipping quote.

Geert Middelman

@Graham You are right on for NY. I think the next one at risk for me is either Wisconsin or Ohio.

I have tried setting individual tax brackets for each county in my own state, but that's very difficult as it's not strictly by zip code as @nita_rae already mentioned. Working towards a solution to have county, city and state information in the address would make things a lot easier.

Bricklanta

I think states aren't pursuing BrickOwl to register as a marketplace facilitator, not because wthey're based in the UK, but because they're too small. Even BrickLink didn't collect sales tax until TLG bought them and Lego definitely has a nexus everywhere in the US.

What is supposed to happen with the first 199 orders you get from Arkansas. Are you supposed to go back and pay sales tax on those? Or does the sales tax collection only start on order #200?

Depending on your volume, you could cut off sales to specific states after 199 orders. I mean, if you're expecting 2000 from Alaska, this isn't a good solution, but if you might get 205, this could be far preferable to paying to file sales tax in that state.