Should you be charging sales tax on more than just your products?
- Small Business
- August 7, 2018 | Mike Plaster
If you sell products in certain states — even if you’re an online seller located elsewhere — you might be required to collect sales tax on those transactions.
(Need more details on how that works? Check out our guide to sales tax nexus before reading further.)
But do you need to charge tax on more than just your product? What about things like shipping, or gift packaging? Depending on the state, those might be taxable, too. And it’s not always easy to figure out, because much like sales tax on products, the rules for taxing shipping and other things can be very confusing.
For example, according to this QuickBooks blog post, shipping and delivery charges in Missouri are nontaxable — but only if the shipping charge is listed as its own item on the invoice, and only if the customer is offered an option to pick up the item instead of having it shipped. Meanwhile, if your package contains both taxable and nontaxable items, Wisconsin taxes shipping on the taxable products, but not the nontaxable ones.
The taxability of other services you might offer customers, such as special gift packaging or engraving, is just as complex. In some states, wrapping isn’t taxed if the product is nontaxable; but in at least one state, if you gift wrap a product you didn’t sell, that service is taxable — even if the product itself isn’t.
It can be a bit hard to figure out, especially when you have to fight through legal language like this: “When a vendor gift wraps an item which he sells, the paper, ribbon and bow become a part of the sale of the item notwithstanding that the wrapping of the item may take place at the point of delivery thereof to the vendee or at one of the vendor's wrapping stations or that the vendor may make a charge for gift wrapping the item.”
Avalara AvaTax automates the process of calculating sales tax — whether it’s on your products, your shipping, your gift wrapping, or all of the above. Avalara has a whole suite of sales tax automation solutions that meets you right where you’re at, no matter what or where you sell. And because we know how important it is for small business owners to keep all of this straight in your accounting process, we’ve made that easy as well: AvaTax integrates with platforms like QuickBooks, and other business software you already use.
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