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I'm currently launching a Shopify online store. I live in…

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I'm currently launching a...

I'm currently launching a Shopify online store. I live in Texas but I'm using printful as my drop shipping company. I can't figure out what I need to add in the taxes tab. I'm only selling in the U.S. I need help with the taxes part to be able to launch my e comerse store

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

Not that I can think of at the moment..

Submitted: 7 months ago.Category: Tax
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11/21/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,622
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi My name's Lane.

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986.

If you can, give me a little more detail, or exactly what the shopify application is asking. As an example... is this about sales tax, income tax, or something else?

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Customer reply replied 7 months ago
This is about sales tax. On Shopify it gives you the option to where Shopify automatically calculates taxes. I tried doing several "sample" orders to see how it works and it doesn't charge taxes. So I tried adding a state and checked out again and it finally calculated taxes. But do I need to do this for every state? Since I'm only selling online?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Great ... tis one's very straightforward. You'll only need to pay charge and pay-in sales tax where you have what state sales law calls "nexus."

...

Nexus, generally means a physical presence. So selling to residents of Texas (if you, yourself, are in Texas) is a given.

...

Every state defines nexus a little differently. (in their state sales tax code). But this almost always means physical presence in some form... such as, having sales people in their state, having a branch office in their state, some even say that if you work a sales or trade show in their state you collect an pay-in sales tax in that state for sales you made while you were there.

...

But if you don't have any of that doing business WHILE IN another state, it's Texas that you'll charge sales tax ... AND only to sales made to Texas residents

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

One last point. SOME states call drop-hipping from their state having nexus, and to further complicate this, sometimes it's the warehouse/shipper that has nexus and sometimes it's you, the seller.

...

Becasue you have to know all 50 state's sales tax law to know the COMPLETE answer to that one, I always recommend that once you know you'll be sipping to a given state, it's time to see how they define nexus. But again, the starting point for you is certainly sales to Texas residents.

..

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

I hope you’ll rate me based on my accuracy and thoroughness (as opposed to any good news/bad news content). Thank you!

...

But again, if you need more on this, please let me know.

Lane

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Customer reply replied 7 months ago
I'm still confused. I'm not only selling to Texas, I'm selling to who ever buys in the U.S.
If the drop-shipping company (Printful) has two warehouses, one in California and another in North Carolina. Would I have to consider that as nexus? A friend of mine told me I would only be charging Texas sales rate since I live here and it would automatically calculate to anyone in the U.S, but when I imputed Texas sales rate and did a trial order with a shipping address from California, nothing for taxes showed up. As the pictures below, one with a Texas address is getting taxed but the other one with the California address isn't.
Customer reply replied 7 months ago
I've already contacted shopify about this but all they told me was to contact a tax professional
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Good morning.

...

I just don't know any other way to say this. You collect sales tax when you sell to residents of a state where you have nexus.

...

You have nexus in Texas becasue that's where you are.

...

I'll have to look at North Carolina and California law to see if using a warehouse there causes nexus.

...

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Here's what California says: (I'll underline the pertinent part)

...

"Persons who are "engaged in business" in California (as defined by Revenue and Taxation Code section 6203) are responsible for collecting and remitting the sales or use taxes on all sales of tangible personal property (unless the transaction is otherwise exempt). Circumstances where a retailer is considered to be engaged in business in California, commonly referred to as "nexus," for sales and use tax purposes include (but are not limited to) the following:

  • 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.
  • Having any kind of representative operating in the state for the purpose of taking orders, making sales or deliveries, installing, or assembling tangible personal property.
  • Making repairs or providing maintenance or service to property sold, whether by employees, agents or other representatives.
  • Deriving rentals from a lease of tangible personal property located in California."

...

So now we need to drill down on what occupying or using means

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

North Carolina considers a seller to have sales tax nexus in the state if you have any of the following in the state:

  • An office or place of business
  • Employees, independent contractors, agents, or other representatives
  • “Any place of distribution, sales or sample room, warehouse or storage place, or other place of business” that you maintain, use or occupy either directly or indirectly, temporarily or permanently

...

And again, HERE we need to see if occupying or using is assigned to the retailer (you) or the company that actually owns and uses the warehouse.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

It's hard to believe that, given shopify's business and their having warehouses in CA and NC, they don't have some guidance for sellers that aren't located IN NC or CA.

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