Must you collect California sales tax?
If you sell in California the simple answer is “Yes”. However it is a bit more complicated than that.
I having been selling jewelry and other vintage items through a company called Etsy. They post my items and provide information and help for managing my sales. When I began most of my sales were outside of California. But when my first California item was sold no tax was collected. I attempted to find out how to collect the tax but was told to contact my tax advisor. I have no tax advisor. I discovered that other Etsy members in California also were not collecting taxes. This is unlawful and I did not want to be charged with a fee and/or a penalty at some point in time. So I did my research.
As a small business owner in California you are required to collect sales tax for every sale you deliver in California and send it to the State Board of Equalization at the end of the year. You are not required to collect sales tax for any other State in the United States.
California State has a standard sales tax rate of 7.25% Many of California’s cities, counties, towns, and communities have special taxing jurisdictions (districts), which impose a transactions (sales) and use tax in addition to the standard statewide rate. Rates for these districts range from 0.10% to 1.00% per district.
Should you charge sales tax for online sales in California?
Guess what? Yes, you should!
Every sale of goods from an online store should have sales tax collected if the buyer is in the state of California. This is the law.
Online companies, similar to Etsy, for example, provide a form to charge the customer for the price of the item, the shipping cost and the tax. You must provide the State in which the tax is applied, California, and the amount. I can find the amount for the County, but since I do not know where the customer lives until the purchase has been made and paid for through PayPal, I set a rate of 8.25% for each California State purchase made. Etsy computes the amount and adds it to the purchase price.
If you sell directly to the customer, or go through some other site, such as Classifiedads.com, you can choose the price, add the sales tax for a sale in California and the shipping cost. This then becomes the total charge for your item. I post a statement that if the customer lives outside of California they can deduct the amount of the sales tax from their payment.
Avoid future problems by following California State Law.
All of the above information applies just to California, but other States may have similar conditions. So check it out and be sure you are within the law.
Information provided by the California State Board of Equalization, www.boe.ca.gov. See Publication 101, “Sales Delivered Outside California”, and Publication 71, “Tax Rates for California Cities and Counties”. Also, review “FAQ forTax Rates for Sales and Use”.
© Marylou Denyer http://mludenyer.com
