Common WooCommerce Sales Tax Questions
- Mar 13, 2016 | Stephanie Faris
As the platform for 30 percent of all online stores, WooCommerce makes it easy for small business owners to start selling products. With a plugin that attaches to any WordPress site, WooCommerce is known for being easy to install and customize. Best of all, the platform is free for use, with businesses only responsible for paying credit card fees.
Beyond the ease of use of the platform, however, business owners still face the complications typical of selling products to customers. WooCommerce does everything it can to make the process as painless as possible, but you’ll still need to know a few things before you make your first sale on the site. Here are some common questions WooCommerce sellers have about collecting and paying sales tax through the platform.
How do I charge sales tax to buyers in my home state?
It depends. Some states are origin based, which means you charge your state and local sales tax no matter where the item ships within your state. The majority of states, however, are destination based. Sales tax is charged on the shipping address on the package, with customers required to pay their local and state rates for every item they purchase.
If I sell to someone in another state, do I charge sales tax?
All states exempt out-of-state companies unless they have nexus in the state. While the definition of nexus varies from state to state, generally a business is considered to have nexus if it has a physical presence in the state. This can mean having an office or warehouse in the state, storing inventory in a facility, or having affiliates or employees selling on your behalf. If you regularly travel to the state to sell at events, you also could be considered to have nexus in that state. When you have nexus, you're required to remit sales tax on any sales you make in that state, so it's important to research the laws specific to every state where you may be seen as having a physical presence.
How do I calculate sales tax?
The easiest way to calculate sales tax on WooCommerce sales is by using the built-in sales tax tools. This is done in WooCommerce’s settings, using a tab labeled “Tax.” Sellers can simply check the box to enable sales tax calculations, then refine those settings to include whether taxes should be displayed or excluded while shoppers browse item descriptions, how to calculate sales tax, and any additional tax classes that should be considered. For enhanced features, businesses can use WooCommerce plugins available from top sales tax software providers to further automate tax collection and filing.
Once I’ve collected sales tax, what do I do with it?
Before you start selling, you’ll need to go to your state department of revenue and register as a business. This will give you a sales tax permit number that you can use when reporting your taxes to the state. Since many states now let you report and pay your sales taxes online, often you’ll have all the information you need on your state’s website. If you sell in multiple states where you have nexus, you’ll also need to pay sales tax in those states.
Do I charge sales tax on shipping?
Online sellers often face a dilemma when calculating sales tax on purchases. Should it be applied before or after shipping costs are added to the purchase? The answer depends on the local laws as they apply to purchases. In some states, shipping is taxable but not handling. In others, both are taxable, while some states exempt shipping and handling as long as they are stated separately on the invoice. This guide can help you determine whether shipping and handling are taxable on your sales.
Sales tax collections can be complicated for online retailers. However, there are many resources available to help, including the tools available for use with WooCommerce. Research the benefits of WooCommerce’s built-in tools versus the available plugins and choose the solution that will make collection easier.