I started this thread not to discuss ideology about taxes, but more about practical aspects of compliance and avoiding fines, etc.
I'm wondering how you decide what state sales tax rate to use. I'm particularly curious about New York. The county based rates make it impossible to use anything other than a large, expensive solution to do this "properly" even for just one product. (Which would knock out using MonsterCommerce or any of 100s of other small cart providers, so that just CAN'T be the way of things.) I often see people using a state rate of something like 8.25% (The state rate is actually just 4.25%, then it changes per county so are many just doing this wrong?)
So how are you all determining the state tax rates, (again, I'm personally especially interested in hearing from folks who have locations, (i.e. the legal term "nexus"), in NY State. And which form do you use? Typically, I'm aware you have to use the county by county form ST-100. But... assuming that one WANTS to try to comply, what are you using to simply report an overall state tax collected?
This page: http://tconsult.com/tax.aspx lays out some of the high-level issues.
It seems to me only one of two things is happening... 1) I'm missing something very basic here or 2) A lot of folks are basically non-compliant and fudging their forms somehow hoping not to get audited.
Thoughts?
Thanks,
Scott
Full Version: State Sales Tax: What Rate To Charge
Hi Scott-
My understanding (of both the article and my previous knowledge of such issues) is that when collecting tax on the internet, you have to collect tax as if the customer actually visited your store location (only if they are an in-state customer)
I have owned internet businesses in both Missouri and Illinois, and since I was pretty new to the whole industry, I made sure that I asked about tax being collected. They told me that all I needed to do is charge any in-state customer as if they were driving up to my store and purchasing directly from there.
Now, I'm not familiar with NY tax laws, and I would not assume that it applies exactly the same way.
I just ran a test on http://www.dell.com. I went through and calculated tax and shipping on a product. Since I'm from NY, I had a couple valid addresses handy in two separate counties with different tax rates. What Dell Small Business was going to charge me for tax did not change from Niagara to Erie county (and there is a 1% difference in between these two counties).
Again, I strongly recommend asking a professional about this... probably the department of taxation is your best resource. Make sure you are doing what you need to be doing...
You can divide tax with MonsterCommerce by zip code, but since zip codes have the potential to span two different counties, this may not be exact. If you do need this, custom programming is the way to go. I would contact John Larson at 877.663.5169 if you need this done still. It would more likely entail an extra field in checkout for county and then calculating the tax based off that field.
Hope this helps!
My understanding (of both the article and my previous knowledge of such issues) is that when collecting tax on the internet, you have to collect tax as if the customer actually visited your store location (only if they are an in-state customer)
I have owned internet businesses in both Missouri and Illinois, and since I was pretty new to the whole industry, I made sure that I asked about tax being collected. They told me that all I needed to do is charge any in-state customer as if they were driving up to my store and purchasing directly from there.
Now, I'm not familiar with NY tax laws, and I would not assume that it applies exactly the same way.
I just ran a test on http://www.dell.com. I went through and calculated tax and shipping on a product. Since I'm from NY, I had a couple valid addresses handy in two separate counties with different tax rates. What Dell Small Business was going to charge me for tax did not change from Niagara to Erie county (and there is a 1% difference in between these two counties).
Again, I strongly recommend asking a professional about this... probably the department of taxation is your best resource. Make sure you are doing what you need to be doing...
You can divide tax with MonsterCommerce by zip code, but since zip codes have the potential to span two different counties, this may not be exact. If you do need this, custom programming is the way to go. I would contact John Larson at 877.663.5169 if you need this done still. It would more likely entail an extra field in checkout for county and then calculating the tax based off that field.
Hope this helps!
I am also from NY and very puzzled on how to put the tax in I was thinking of doing this by zip code but I cant find a form that breaks it down that way. I hope some can figure out a better way.
It would be worth making that call to you local city/state offices to get the official answer.
Make sure you get the persons name that you talked to and also request information that was just discussed with you. Most will send this information for free. (There may be a small fee for the information if you want it mailed in some states)
I know each state has a different way of doing things. Collecting taxes can be very confusing. Make the folks work a little and pick up the phone.
Make sure you get the persons name that you talked to and also request information that was just discussed with you. Most will send this information for free. (There may be a small fee for the information if you want it mailed in some states)
I know each state has a different way of doing things. Collecting taxes can be very confusing. Make the folks work a little and pick up the phone.
JBKSWrestling-
I unfortunately do not have a new york zip code -> county map. But like I said, this may not even be necessary. I would double check with the department of taxation to be sure. Thanks!
I unfortunately do not have a new york zip code -> county map. But like I said, this may not even be necessary. I would double check with the department of taxation to be sure. Thanks!
I 2nd the idea on checking with your local sales tax authority.
It may be safest to simply charge the maximum for your state for auditing, sales tax paperwork, and 'kiss' principles.
It may be safest to simply charge the maximum for your state for auditing, sales tax paperwork, and 'kiss' principles.
I did speak with NY State tax folks. I may try again with someone other than the woman I spoke to. She was not very clear about online. However, some things are. In NY, if shipping goods the tax rate is supposed to be based on the delivery location. So technically, I don't think I'm supposed to charge as if they're coming to "my store in my county."
And yes, as others have pointed out, zip codes are worthless. Zips cross county and town lines. The super expensive sales tax solutions can do this. Putting in a field for county doesn't really help. Yes, I could calculate based on that. But not in real time with real-time credit card authorization followed by drop ship. (Plus, a lousy usability experience... too many would bail on cart.) The charging the maximum for the state probably doesn't work as it's likely illegal to overcharge, and in any case, tax reporting requires filling out the forms by county... information I won't even have.)
The Dell experiment that Sabres00 did is really interesting. If Dell can do this, surely I can. Yes, I can try to pay for some tax advice. But that will be expensive. There's just no way I'm the first one doing this though.
Hoping someone out there is in NY State and can offer a solid clue as to what they're doing and why. My goal is to avoid custom code or paying expensive tax lawyer; though I'll have to if I can't get answer soon.
I just have to be missing something here.
Scott
And yes, as others have pointed out, zip codes are worthless. Zips cross county and town lines. The super expensive sales tax solutions can do this. Putting in a field for county doesn't really help. Yes, I could calculate based on that. But not in real time with real-time credit card authorization followed by drop ship. (Plus, a lousy usability experience... too many would bail on cart.) The charging the maximum for the state probably doesn't work as it's likely illegal to overcharge, and in any case, tax reporting requires filling out the forms by county... information I won't even have.)
The Dell experiment that Sabres00 did is really interesting. If Dell can do this, surely I can. Yes, I can try to pay for some tax advice. But that will be expensive. There's just no way I'm the first one doing this though.
Hoping someone out there is in NY State and can offer a solid clue as to what they're doing and why. My goal is to avoid custom code or paying expensive tax lawyer; though I'll have to if I can't get answer soon.
I just have to be missing something here.
Scott
I do have a excel file with the tax rate to zip code I've used for some sites I did for other people. My understanding is that you change the tax amount of where they are located in the state. If you want this file just email me at leif.olson@always-charming.biz
Hi. I'm located in New York. You have to collect sales tax (both state 4.25% & county/city 3 to 5-1/2%) on any orders shipped to addresses in New York state. Even if your customer is from Ohio and requests that you ship to a sister in New York, you still have to collect sales tax. But, the shopping cart software figures that all out anyway. The sales tax rate that you have to pay is the rate applicable to the address you shipped to. Publication 718 has all of the state's sales tax rates:
http://www.tax.state.ny.us/pdf/publication.../pub718_803.pdf
Publication 717 breaks zip codes down by community:
http://www.tax.state.ny.us/pdf/publication.../pub717_999.pdf
This publication says that you can't go by zip code because some tax areas/zip codes overlap. I just charge a flat 7.25% rate and keep track of orders/sales tax collected by city/zip code on an excel spreadsheet. Most of my sales are not in New York, so it's very easy to keep track. And I picked 7.25% because the city I am located in is still 7.25%. Most counties in New York are increasing their tax rate by 1%, so I'll probably have to increase it soon anyway. You do get a small credit on any state sales tax collected.
The difference between what is collected and paid is negligible for me. If you have a "loss", you can just recalc your gross sales to adjust some of your sales revenue to taxes collected - decrease your gross sales by a proportionate increase in sales tax collected is the easiest way, but not completely accurate. Most accurate way to recalc would be: gross sales for the area that is short / (1 + sales tax rate for the area) = adjusted gross sales.
If you have a large percent of your sales from New York, you can just err on the side of caution and collect 8.25%. Although, then you'd have to do the reverse and consider it revenue instead of sales tax collected if you collected more than you owe. This might be more of a red flag for the state than if you undercollected (assuming you collect alot of tax) because I suppose a case could be made that customers thought they were paying taxes and weren't. Personally, I feel the more that I charge for sales tax, the more customers I will lose because people don't want to pay sales tax. You can always reclass gross sales to income tax (like the stores that say "tax included" do).
Anyway, there really isn't an easy way to do this in New York
and I realize I've been very long winded. Hope this makes sense! Post any other questions you may have and I'll see if I can help answer them. 
http://www.tax.state.ny.us/pdf/publication.../pub718_803.pdf
Publication 717 breaks zip codes down by community:
http://www.tax.state.ny.us/pdf/publication.../pub717_999.pdf
This publication says that you can't go by zip code because some tax areas/zip codes overlap. I just charge a flat 7.25% rate and keep track of orders/sales tax collected by city/zip code on an excel spreadsheet. Most of my sales are not in New York, so it's very easy to keep track. And I picked 7.25% because the city I am located in is still 7.25%. Most counties in New York are increasing their tax rate by 1%, so I'll probably have to increase it soon anyway. You do get a small credit on any state sales tax collected.
The difference between what is collected and paid is negligible for me. If you have a "loss", you can just recalc your gross sales to adjust some of your sales revenue to taxes collected - decrease your gross sales by a proportionate increase in sales tax collected is the easiest way, but not completely accurate. Most accurate way to recalc would be: gross sales for the area that is short / (1 + sales tax rate for the area) = adjusted gross sales.
If you have a large percent of your sales from New York, you can just err on the side of caution and collect 8.25%. Although, then you'd have to do the reverse and consider it revenue instead of sales tax collected if you collected more than you owe. This might be more of a red flag for the state than if you undercollected (assuming you collect alot of tax) because I suppose a case could be made that customers thought they were paying taxes and weren't. Personally, I feel the more that I charge for sales tax, the more customers I will lose because people don't want to pay sales tax. You can always reclass gross sales to income tax (like the stores that say "tax included" do).
Anyway, there really isn't an easy way to do this in New York
and I realize I've been very long winded. Hope this makes sense! Post any other questions you may have and I'll see if I can help answer them.
I also called the State Tax People and I was told that I could not use zip codes. They gave me no help on what I should do. I asked them what do I have to do not charge tax but still have to take it out of my price I sell the item for using the correct county tax price. You got me on this one I am dumb founded. 
I have basically found that most people who we think should know about this stuff, know about as much as we do! That's why I researched it myself and my accounting background didn't hurt (knew where to look because of it). That's why I'm not too concerned with minor discrepancies. In any audit, the discrepancy first needs to be "material" which means big enough to make a difference and then it needs to be "with intent". If you make an honest mistake and it isn't big (relatively speaking), the state is not going to throw you in jail because of it! 
Thanks for all the responses. Based on these and my own research, it does seem that you are unquestionably required to collect tax based on the ship-to address within NY State. (Assuming you have a presence, (i.e. "nexus), within the state.)
There seem to be only a couple of ways to handle this...
* Use a very high end shopping cart solution, (costing hundreds, if not thousands), to keep up the tax tables by county, (and in some cases also by product types... Orange juice may be a beverage one place and a fruit in another... with different tax rates <--- no, I didn't make that up.) (This would include a custom in-house system.)
---- Bzzzt.... crappy solution us little guys can't afford! ------
* Don't do orders in real time. Figure out tax based on address. (Also would require software or some really good county map info and time.)
---- Bzzzt.... customers expect speed and ease and to know the total order amount. ----
* Use MonsterCommerce "extra question" to ask for county. Which still means figuring it out later.
---- Bzzzt, sloppy and of questionable accuracy -----
* Get all NY MonsterCommerce customers together and push MonsterCommerce to add a county field, (with associated sales tax), to check out.
---- interesting... but still doesn't acutally quite work. Customers could select the county with the lowest tax. You're still going to ship to the ship-to. If too many do lie about this, you could end up with a lot of tax to ONE county which may set off a red flag.
* Just use the 8.25% for all NY method and figure it out after the fact. (Still difficult without either the county question or expensive software or a ton of time.)
This last way, however, is the only way to go as I can see it. (At least if you want to do real time charges.) So, the only thing I'll need to find out now is what's the real deal for what happens - if anything - if you charge too much or too little.
Right now, if the software allowed it, I'd probably just say, "Sorry, product not available in New York." or just move to Connecticut or something.
I did talk to a tax guy about this. If you're just a little folk, it's not like they're going to target you anyway. But that's not the point. It seems even if you WANT to do things right, there's almost no way.
Of one thing I'm becoming fairly certain... there's a ton of people out there doing this in "wrong" ways. Me? I'm going to just use 8.25% and figure out the right way to fill out ST-100 as best I can. The rest? We'll see.
Scott
There seem to be only a couple of ways to handle this...
* Use a very high end shopping cart solution, (costing hundreds, if not thousands), to keep up the tax tables by county, (and in some cases also by product types... Orange juice may be a beverage one place and a fruit in another... with different tax rates <--- no, I didn't make that up.) (This would include a custom in-house system.)
---- Bzzzt.... crappy solution us little guys can't afford! ------
* Don't do orders in real time. Figure out tax based on address. (Also would require software or some really good county map info and time.)
---- Bzzzt.... customers expect speed and ease and to know the total order amount. ----
* Use MonsterCommerce "extra question" to ask for county. Which still means figuring it out later.
---- Bzzzt, sloppy and of questionable accuracy -----
* Get all NY MonsterCommerce customers together and push MonsterCommerce to add a county field, (with associated sales tax), to check out.
---- interesting... but still doesn't acutally quite work. Customers could select the county with the lowest tax. You're still going to ship to the ship-to. If too many do lie about this, you could end up with a lot of tax to ONE county which may set off a red flag.
* Just use the 8.25% for all NY method and figure it out after the fact. (Still difficult without either the county question or expensive software or a ton of time.)
This last way, however, is the only way to go as I can see it. (At least if you want to do real time charges.) So, the only thing I'll need to find out now is what's the real deal for what happens - if anything - if you charge too much or too little.
Right now, if the software allowed it, I'd probably just say, "Sorry, product not available in New York." or just move to Connecticut or something.
I did talk to a tax guy about this. If you're just a little folk, it's not like they're going to target you anyway. But that's not the point. It seems even if you WANT to do things right, there's almost no way.
Of one thing I'm becoming fairly certain... there's a ton of people out there doing this in "wrong" ways. Me? I'm going to just use 8.25% and figure out the right way to fill out ST-100 as best I can. The rest? We'll see.
Scott
Just got my ST-100 in the mail for this quarter's return. Fun, fun, fun. 
Hello!
Just wanted to make clear that MonsterCommerce allows merchants to charge sales tax based on "Bill To" location or "Ship To" location. This option allows you to check with your local tax authorities and determine how to tax. In our research, we have found that this rule can actually change from state to state. We encourage you to do the proper research to learn the rules in your state.
If you are interested in the subject of internet taxation and would like to do more reading, i would recommend the following articles:
USA TODAY ARTICLE
INTERNET WEEK ARTICLE
INTERNET.COM ARTICLE
Just wanted to make clear that MonsterCommerce allows merchants to charge sales tax based on "Bill To" location or "Ship To" location. This option allows you to check with your local tax authorities and determine how to tax. In our research, we have found that this rule can actually change from state to state. We encourage you to do the proper research to learn the rules in your state.
If you are interested in the subject of internet taxation and would like to do more reading, i would recommend the following articles:
USA TODAY ARTICLE
INTERNET WEEK ARTICLE
INTERNET.COM ARTICLE
Yes, and thank you for posting this in the admin area. I charge sales tax based on delivery location and the default was billing address, so I had to change it. New York would have been very, very mad at me if I wasn't collecting there tax. Oh! Actually, they would have just made me pay it. 
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