Need Help with Ecommerce Sales Tax and NY Counties

[xerx214]

Hello, can you please clarify one issue for me? I’m starting an e-commerce website selling art to US and Canadian customers. I am based in New York, so I understand I have to charge everyone purchasing from New York sales tax. My understanding is also that people purchasing from all the other states should not be paying sales tax. Now, here’s the tricky part. One of my competitors is a small company as far as personnel, but with big sales numbers, he has been in the business for about 8 years now. He is based in the state of Washington. He is paying a distributing and warehousing company to store all his merchandise in California and they also ship it out of there. He DOES NOT charge any customers from California sales tax even though he appears to have physical presence in that state (in my opinion). There has to be something else here I’m missing, there’s no way he would risk such a problem with the IRS, how is he going around this rule? The reason I’m asking is that I want to ship out of California as well. Given that California is the state with the biggest population, charging everyone there sales tax does not sound as a smart business move. Also, for New York customers, do I have to charge the sales tax for New York state, or for the particular county I live in (Nassau, NY)?

[Harold Mansfield]

Note: xerx214 I moved your new question to it's own thread in hopes of getting you more responses.

[aaronhorowitz]

The California Board of Equalization website includes the following as subjecting a company to collect sales tax: "Maintaining, occupying or using any type of office, sales room, warehouse or other place of business in California. This includes use that is temporary, indirect or through an agent or other representative." If your competitor is paying a warehousing company to store his merchandise, then it sounds like he should have been collecting sales tax.

There's a state sales tax as well as sales taxes for local jurisdictions. In some cases the State will collect sales tax revenue on behalf of local jurisdictions, however this is not always the case.

[Brian Altenhofel]

Hello, can you please clarify one issue for me? I’m starting an e-commerce website selling art to US and Canadian customers. I am based in New York, so I understand I have to charge everyone purchasing from New York sales tax. My understanding is also that people purchasing from all the other states should not be paying sales tax. Now, here’s the tricky part. One of my competitors is a small company as far as personnel, but with big sales numbers, he has been in the business for about 8 years now. He is based in the state of Washington. He is paying a distributing and warehousing company to store all his merchandise in California and they also ship it out of there. He DOES NOT charge any customers from California sales tax even though he appears to have physical presence in that state (in my opinion). There has to be something else here I’m missing, there’s no way he would risk such a problem with the IRS, how is he going around this rule? The reason I’m asking is that I want to ship out of California as well. Given that California is the state with the biggest population, charging everyone there sales tax does not sound as a smart business move. Also, for New York customers, do I have to charge the sales tax for New York state, or for the particular county I live in (Nassau, NY)?

First, the IRS doesn't care about sales tax. That's outside of their jurisdiction.

As for California sales tax due to a nexus being created by using a distributor/warehouse/dropshipper (New York, Texas, and Florida also do that), he might be including it within the total price. It's supposed to be advertised, but there's also the issue of limited enforcement resources.

New York is a destination-based sales tax state. That means you charge sales tax based on the shipping destination. While you live in Nassau, if your customer lives in Watkins Glen and you ship to Watkins Glen, then the tax jurisdiction is Watkins Glen.

Sales tax in e-commerce is always fun. In Oklahoma, we have 816 jurisdictions, plus different rates for different types of goods, plus "tax holidays", etc.

[jamesray50]

There are programs that will help with sales tax. Off hand the one that comes to mind is Avalara (http://www.avalara.com/). The work will several accounting programs and probably shopping carts.

Oh, I don't get a commission for recommending them, I just know a lot of people who use them.