General Question

BoyWonder's avatar

How do I compute sales tax for purchases made from another state?

Asked by BoyWonder (811points) March 5th, 2012 from iPhone

I have an online store selling t-shirts. I live in NYC. How do I charge sales tax to people who place orders from another state? Do I charge NYC sales tax or their local tax? I’m new to this, don’t shoot me down. Thanks.

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5 Answers

JLeslie's avatar

You might not need to charge any tax. The old rule was to tax only if the business had a store in the state being shipped to. The tax charged would be the ship to state’s tax. So for instance if I buy something from Bloomingdale’s and have it shipped to my home in TN, no tax, because there is no Bloomies here. But, if I ship it to my MIL it is taxed at her county’s tax rate in FL, because there are Bloomies in that state. I think the laws might still work that way, because I order exercise clothing from a website, and I am never charged tax.

An accountant should know. The accountant can also help you set up your books for the business and inform you what to keep track of, how to pay any required quarterly taxes, etc.

cazzie's avatar

You don’t charge out of state purchases tax.

If you want a quick tip and run down, get a hold of another online seller in your area. Check out and ask.

SpatzieLover's avatar

For online stores, you only charge sales tax for customers purchasing from the same state you are located in.

Ebay biz owner

cazzie's avatar

I don’t know what the rule is about NYC tax. I have never had to deal with a ‘city tax’, but on your website you need to say, NY State residents are charged X% and put that in the calculation at check out, I think that is possible. But someone buying your Tshirt from Wisconsin or Minnesota wouldn’t have to pay NY State sales tax, I don’t believe. It is still works the way I remember it.

srmorgan's avatar

As mentioned previously, you are not required to collect sales tax on any purchases sent out of state. You are required to charge sales tax on all shipments within New York.
You will charge sales tax to the customer at the rate in force in the city or county in which they live, for example a resident of Warren County in upstate NY will pay less sales tax than a resident of New York City.
You are responsible to charge the correct sales tax rate.
You need a sales tax ID number (I don’t recall what it is called in NY) obtained through what used to be called the NYState Department of Taxation and Finance.
As a small seller you will probably only be required to report and remit sales tax annually.
If your online store is using someone else’s software it should be easy to find a way to charge the correct amount of sales tax. Most online stores have it covered.

Now, your customer in another state is required to report the out-of-state purchase of your product and pay what is called “use tax”. Use tax is paid at the same rate as local sales tax. In North Carolina we are required to estimate the amount of our out-of-state purchases on our state income tax form and pay the appropriate tax due. Most people ignore it and it is difficult to enforce.
However it is a different case for businesses who must report use tax at the same time sales tax is reported and remitted. We got caught on an audit a few years after we moved the business to North Carolina and the Dept of Revenue charged us a bunch of penalties and interest. That hurt.

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