Sales Tax

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Webinar: A Beginner's Guide
For online sales in-state orders are taxed by default. Out-of-state orders are usually not taxed. However, if the store frequently ships orders to other states, it is important to know the Sales Tax Nexus rules for those states.
 
Example: Store is located in Colorado. Store exceeded $500,000 in taxable sales from orders shipping to California that year. The store is now responsible for collecting sales tax from California customers and remitting tax to the state.
 
Tax rates depend on whether the store’s state is ‘Origin based’ or ‘Destination based’. Not sure which your site is using? You can review Origin v. Destination Tax States for more details.
 
When an IndieCommerce site is initially configured, we will set 2 tax rules by default. Please do not change the name of these rates:
  1. ‘Tax’ - The tax rate at your store’s location 
  2. ‘NY Tax’  - For orders shipped from a store outside of NY to an address within NY. Since ABA has nexus in NY, we charge NY tax on out-of-state orders shipped to NY. ABA is also responsible for remitting this tax to NY state.

    1. For destination based stores, the rate is determined by the customer’s address in NY
    2. For origin based stores, the rate is determined by the ABA office location in NY
Please Note: While our system will calculate the tax amount for orders, we will not remit tax on your store’s behalf. We will only remit NY Tax (for stores outside of New York). The store is responsible for remitting sales tax to their own and other states.

DESTINATION BASED SALES TAX

If you are a destination-based state, the sales tax rate for orders is determined by the customer’s location.
  1. For shipped orders, the system uses the rate at the destination (city, state and zip)
  2. For store pickup orders:

    1. Single Location Stores: We use the rate at the primary store location
    2. Multiple Locations: We use the rate at the pickup outlet
For destination-based tax, the rate provided through individual tax rules will be ignored and will instead be pulled from TaxJar. This tax rate is based on the city, state and zip code combination provided for the delivery address and still only applies to orders that meet the Tax rule conditions (see Adding Conditions below). All other settings in the tax rule (such as, which product classes and line items are taxed) will still apply.

ORIGIN BASED SALES TAX

If you are in a origin-based state, the sales tax rate for orders is determined based on the store’s location. 
 
  • For stores with a single location the system will use the tax rate of the store location for shipped and store pick up orders
  • For stores with multiple locations:
  1. For shipped orders, the system uses the rate at the primary outlet.
  2. For store pick up orders, the system uses the rate at the pickup outlet.

CREATING TAX RULES

Destination Based Stores

Since your site is using destination based shipping, our system will override your set tax rate and calculate the tax using TaxJar. TaxJar will accurately calculate the tax amount based on the order’s delivery zip code.
 
If you are not responsible for remitting out of state economic nexus taxes and/or you do not have multiple locations, you will not need to edit your tax rules.

Origin Based Stores

Individual tax rules control the rate of tax applied to orders. These rules also control what product types are taxed, what line items are taxed, and if non-shippable items are taxed.
 
Navigate to Store > Configuration > Taxes > Add Tax Rate
  1. Fill in the ‘Name’ of the tax rate . (Please use a name other than ‘Tax’ or ‘NY Tax’ and do not change the names of these rates)
  2. Provide the ‘Rate’ (This is especially important for source based tax as it will control the amount calculated for tax).
  3. ‘Taxed Products’ : Select whether this tax rate will apply to all products, or only items that can be shipped.
  4. ‘Taxed Product Types’ : Select the tax product types. Those left unselected will not be charged the tax rate.
  5. Select taxed line items.

    1. Shipping - Check this if your state requires tax on shipping charges
    2. Discounts - Check this to apply tax to the discounted order total
    3. Tax - Do not check this
  6. Set the weight  - Leave it as 0
  7. Include this tax when displaying product prices - Leave it unchecked
  8. Tax inclusion text - N/A
  9. Submit

ADDING CONDITIONS

Much like other rules you can create on your IndieCommerce site, tax rates will also have conditions. These will tell the system what conditions to check on an order and what rule to apply if the order meets those conditions.
 
Example: Tax (For a store located in VA)
 
Condition 1 - Check an order’s shipping state
 
This condition checks the order’s shipping state and if the value on the order is ‘Virginia’, the system will apply the ‘Tax’ rate to the order. 
  • Condition: ‘Check an order’s shipping state’
  • Value: Virginia
Condition 2 - Order has a shipping quote from a particular method that is Store Pick-up
 
This condition checks that the order is marked as ‘In Store Pickup’. 
  • Condition: ‘Order has a quote from a particular method’
  • Value: In-Store Pickup

STORES WITH MULTIPLE OUTLETS

Destination Based Stores

For destination based stores with multiple outlets do not create an additional tax rule. Instead, the site should edit their existing ‘Tax’ rule. The condition will be checking an order’s delivery zip code to see if it matches the outlet’s location.
 
Navigate to Store > Configuration > Taxes
  1. Locate your ‘Tax’ rule
  2. Click ‘conditions’ on the ‘Tax’ row
  3. Click ‘add condition’
  4. Select ‘Order has a store pickup from a particular outlet’
  5. Under ‘Locations’ set the value to the outlet location
  6. Submit changes
  7. Drag and place the new condition under the ‘OR’
  8. Save

Origin Based Stores

For stores with multiple outlets, you will need to have the rules and conditions mentioned above but you will also need to create a tax rule for each additional outlet and add an additional condition.
  1. Create the tax rule for your additional outlet(s) following the steps 1-8 above under 'CREATING TAX RULES’
  2. Follow the steps to apply Condition 2 found under 'ADDING CONDITIONS’
  3. Add a third condition

    1. Select ‘Add Condition’
    2. Select ‘Order has a store pick up from a particular outlet’
    3. Under ‘Locations’ set the value to the outlet location
    4. Save
  4. Repeat steps 1-3 for each outlet location
  5. Navigate to your tax rate list and find the ‘Tax’ row
  6. Click ‘Conditions’ on the ‘Tax’ row
  7. ‘Edit’ the condition ‘Order has a shipping quote from a particular method’
  8. Select the checkbox next to ‘Negate’
  9. Save.

ADJUSTING TAX RULES FOR PRODUCT CLASSES

In most cases, you will sell both taxable and non-taxable items. You will be able to select which ‘Product Classes’ are taxed and which aren’t when setting up tax rules, along with what line items are taxed.
 
Navigate to Store  > Configuration > Taxes
  1. Select ‘edit’ in the ‘Tax’ row
  2. Scroll to ‘Taxed Product Types’ - find the class you are looking for:

    1. If the checkmark is PRESENT, the product class will be taxed
    2. If the checkmark is REMOVED, the product class will not be taxed.
  3. Scroll to ‘Taxed line items'

    1. If your site is enabled to allow coupons, you should select the ‘Coupon discount’ line item to be taxed
    2. If your state requires shipping to be taxed, you should select the ‘Shipping’ line item to be taxed
  4. Click Submit at the bottom of the page.
  5. Repeat for ALL Tax Rules listed until all tax types are modified.

TAX RATE SCENARIOS

Scenario: Your store is in Colorado, but you have a large customer base in Nevada. You end up having sales tax nexus in Nevada. .  The store needs to edit their ‘Tax’ rate so that applies to Nevada orders.
 
Since the store is in Colorado, and Colorado is a destination based state, the tax rate for orders being shipped to Nevada will be the NV Tax Rate (calculated by our system).
  1. Navigate to Store > Configuration > Taxes
  2. Select ‘Conditions’ in the Tax row
  3. Select ‘Add Condition’
  4. Select ‘Check an order’s shipping state’
  5. Select ‘Nevada’
  6. Save
  7. If there is not already an ‘OR’ operator in the rule, click ‘Add or’
  8. Move the conditions that check for CO and NV under the ‘OR’ as child items
  9. Save
Files: 
PDF icon SettingSalesTaxRates-Screenshots.pdf
D7 Taxonomy: 
eCommerce Administration
IndieCommerce
Tax

IndieCommerce Help Documents

 

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