U.S. - Taxes

[Star]

U.S. sale Tax
If our customers are in the same state as the physical location of our business, they owe sales tax on items they purchase from us.

And if we use a third-party merchant account. If our customer is in the same state as our merchant account provider, the customer will owe taxes on any purchases our provider processes.

[Matthieu Biart]

Hi Star!

Thank you for this explanation about tax applications.
Questions:
* Is the tax application the same for vouchers, shipping, handling, ...?
* How should taxes be displayed in the invoice?
* Is there any law requiring extra information about sales, products or anything else?

[Star]

As long as it is a tangible product, the sale tax policy applied. For shipping and handling, it is taxable if the charges are associated with the sale of taxable goods or service to a non-resller. For example: you sell a sofa to a customer for $500. You agree to deliver the sofa and charge separate fee of $50 for delivery. Because your sale of the sofa is taxable, your $50 delivery charge is also taxable. You should collect sales tax on $550.
In contrast, if you sold a similar sofa for $500 to another customer who issues you a properly completed resale or exemption certificate, then your sale and the delivery charge are exempt. If you deliver the sofa for a fee of $50, the delivery charge is not taxable. You do not collect sales tax on the $550.

There is no sale tax for service, (house cleaning, gardening, accounting, legal service…..) as it is not a tangible product. To make it clear: I am in California and one of my suppliers is in Michigan. For all of the customers who are living in California or Michigan has to pay sale taxes.

The invoice should look like the attachment.

We must separately state the sales tax amount on our invoice or receipt unless we provide a written statement on the invoice or receipt that the sales price includes sales tax.

And the sale tax has to round up on the third decimal place if it is greater than 4.

sale tax is paid to the state that the delivery occurred.

[superann]

Questions:
- Is the tax application the same for vouchers, shipping, handling, ...?
- How should taxes be displayed in the invoice?
- Is there any law requiring extra information about sales, products or anything else?

Unlike VAT, there is no nationwide tax. Tax laws are pretty varied across the US and are handled differently in each state that a business has a physical presence in. Having a physical presence in multiple states is quite common. Some pretty good information on tax laws in the US can be found on wikipedia.

Some quick facts to note:

- Some states may tax shipping costs, although most don't.

- Some states tax some specific kinds of items but not others, and different tax rates may apply depending on type of item even within the same state.

- Some states impose an extra local tax when a business is located within that particular county or municipality. Unfortunately it's sometimes difficult to determine whether an address is within a specific county or municipality as a lookup has to be done on the street address, as city/zip code may not always provide adequate information.

There should be an option available for each state to combine multiple sales taxes imposed into one separate line item, and/or separate the various taxes into their own line items.

Likewise, the option to apply sales tax to shipping and/or discount vouchers should also be enabled/disabled per state.

[David Niry]

I already posted most of this in another post, but thought it might be useful to do it here again in this dedicated thread...

If I may add to Star's point:

1) Sales tax will be owed in ANY state where the company has a physical presence. So say, you're incorporated in NY, but also have a physical store in NJ, you will need to pay taxes if you're shipping to NY or NJ. More details, specifics and exceptions at http://www.dirjournal.com/computers-journal/internet-sales-tax-what-you-need-to-know/

2) I am not sure about how every state does it, but in NY, tax is broken down by county: see http://ny.rand.org/stats/govtfin/salestax.html

I just recently did a Prestashop integration for a client based in NY, and we had to implement this. The only way to do it was to purchase a ZIP code database and cross it over with this tax rate table based on county name. Then I modified a bit the Tax class code to implement a ZIP code based rate determination. See http://www.prestashop.com/forums/viewthread/6900/

It is far from perfect though, according to http://salestaxbuzz.org/2009/01/08/zip-zip/ but what else could we do ? That solution was the closest we could come to reality, and tests were successful so far on many different zip codes we tried.

[Matthieu Biart]

Hi everyone!

Thanks to both of you for those explanations.
We'll have a look on the different articles you've quoted.

[David Niry]

You're welcome

[Star]

Hi everyone!

Thanks to both of you for those explanations.
We'll have a look on the different articles you've quoted.

Thanks for the hard work.

[David Niry]

I just found a very interesting web site that actually sells a complete sales tax database: http://thestc.com/Services.stm

Granted, it comes at a price: $850 per year for four quarterly updates, and $1,270 per year for twelve monthly updates. That's quite a budget for most of us small merchants. But for larger companies, this is probably well worth the expense. Using this data, you could then just use a similar method to the one I mentioned based on ZIP code but acess this sale stax data directly and be sure that it is not only accurate but updated as well.

Presta Team: joint venture with a company like this ? Package the data with a sales tax module on Prestastore and share profits with the data company ? Something that might be worth looking into.

I think this is as good as it's gonna get, seeing how much of a mess US sales tax is... You've got to love Europe and its simple VAT system ;-)

-David

[diamond204]

Hi Everyone,


Great post above. I wanted to add something as well - I have also mentioned this on the bug tracker.

One key to correct calculation of US sales tax is that it must be calculated at the end of the sale.

Currently, Prestashop calculates tax as you add products to your cart. This may work fine in other countries, but in the US, the more items that are added, there will be a slight difference in the total due to rounding.

To complicate matters , it seems Prestashop sends checkout data to the Paypal module correctly for US sales , so I receive one unique calculation in the Prestashop cart, and another calculation in Paypal. I have had to disable taxes in Prestashop and only use Paypal to calculate tax because of this.

Here is a paste from one of my bug reports:
I think I have found where the issue lies. You computation for tax is correct. The issue lies in the order in which the computation is completed and what data is passed to Paypal.
For our example, we are buying 10 items that are $1.50 at a 9.75% State tax rate.
Method one of computing (which PS uses in the cart): unit price*qty*tax rate for our example {1.50 * 10} = 15 * 1.0975= $16.46 product with tax
Method Two (which is on the product pages and is passed along to Paypal): unit price * tax rate * qty for our example [1.50 * 1.0975} = 1.65 * 10 = $16.50 product with tax
Usually in the US, the state tax is computed by taking the complete taxable product subtotal and then multiplying by the state tax rate.
By trying to compute the tax the earlier stage, the Paypal cart is charging too much for tax.
Method 1 is closer to US tax rate computation than Method 2.

[hannabee296]

Hi Everyone,


Great post above. I wanted to add something as well - I have also mentioned this on the bug tracker.

One key to correct calculation of US sales tax is that it must be calculated at the end of the sale.

Currently, Prestashop calculates tax as you add products to your cart. This may work fine in other countries, but in the US, the more items that are added, there will be a slight difference in the total due to rounding.

To complicate matters , it seems Prestashop sends checkout data to the Paypal module correctly for US sales , so I receive one unique calculation in the Prestashop cart, and another calculation in Paypal. I have had to disable taxes in Prestashop and only use Paypal to calculate tax because of this.

Here is a paste from one of my bug reports:
I think I have found where the issue lies. You computation for tax is correct. The issue lies in the order in which the computation is completed and what data is passed to Paypal.
For our example, we are buying 10 items that are $1.50 at a 9.75% State tax rate.
Method one of computing (which PS uses in the cart): unit price*qty*tax rate for our example {1.50 * 10} = 15 * 1.0975= $16.46 product with tax
Method Two (which is on the product pages and is passed along to Paypal): unit price * tax rate * qty for our example [1.50 * 1.0975} = 1.65 * 10 = $16.50 product with tax
Usually in the US, the state tax is computed by taking the complete taxable product subtotal and then multiplying by the state tax rate.
By trying to compute the tax the earlier stage, the Paypal cart is charging too much for tax.
Method 1 is closer to US tax rate computation than Method 2.

question, does prestashop automatically extract rates from the destination state in the shipping address? i've had problems with ecommerce where the user selects his or her own tax rate which sometimes doesn't match up the address.

[diamond204]

From what I have seen, yes, PS does apply to shipping address. Every - please correct me if I am wrong, as my memory may be hazy as I have not played with Prestashop taxes in many months.

[Matthieu Biart]

Here is another related post: Locale Specific Taxes (US)

[Degsey]

In the USA there is also extra county taxes to pay in some states, so if the buyer lives in the same county there will be an extra percentage to add on. I do not know if prestashop can handle this.

[dgf15215]

Here in the Commonwealth of Pennsylvania (the term 'Commonwealth' is another title for what we refer to here as "States") sales tax is based on the county in which the sale is made. My business is in Allegheny County and when I sell a good or product to anyone else in the Commonwealth I have to charge a full 7% sales tax which includes a 6% State Tax and a 1% local County tax. Less than an hour's drive away away there is no local sales tax and they get to charge the same customer only 6%. So I don't need to know what county they're in, just what county I'm in.

Don Friedman
Pittsburgh, PA USA

[DavidL]

We have the same thing here in NC. Three counties charge a bit more for sales tax. This is a very big problem for us because the State is very aggressive in making sure you're compliant and if not, handing out very stiff penalties. I have seen ZERO shopping carts that have this ability built in.

Of course if the states have their way everyone, everywhere will be paying sales tax regardless of physical location. I can't imagine how that will work but many states are pushing for it already.

[dgf15215]

David - it seems to me that eventually the governments will get together to figure out an approach to a solution that will be software-driven and like the post office's zip code engine, the right tax can be found for each address and then processed through a central system so that you and I won't have to file separate reports for each entity. That's the only practical solution.

As someone who has a physical store and presence I very much resent the ability of online merchants to avoid the sales tax system altogether. Even if my online competitor sells for the same price, I'm at a 7% disadvantage from the get go. Exactly who is that fair to? Certainly not to me who has made the physical investment in property, inventory and etc. By law I'm supposed to pay a "use tax" when I buy from out of state and avoid paying sales tax but less than 1% of all business entities report that so in essence it's not collected. That being said, there has to be a practical way to collect and pay it with a reasonable amount of certainty and with today's technology it should be both possible and easy. Come to think of it, it seems like a very natural extension of the post office's mapping/delivery system technology and eminently practical. Maybe a way for them to make the bucks they're losing with the loss of first-class mail.

Don Friedman
Pittsburgh

[DavidL]

I understand where you're coming from, we support small independent retailers as well as selling online. However our shipping costs are way higher than 7, 8, or 9% so we take a much bigger hit. Tthe big boys play in rarefied air with shipping that we can't compete with. We charge our online customers what FedEx charges us so it makes much more sense for the consumer to buy locally instead of online. There are always two sides to everything.

If the reason for collecting sales tax was to support the independents like you then I'd be all for it but it's like the traffic camera, there for the revenue of the state/city.

However the core issue remains, we need a way to calculate sales tax accurately within one state, let alone across the country.

[dgf15215]

David - it's a roundabout argument I guess. Most of my products are going into private medical practices and the case weight runs around 30lbs. I may have one or two customers who actually come and pick this stuff up, virtually all of it is shipped FedEx Ground and my customer pays both the shipping cost and tax on the shipping cost. You and I certainly agree: An easy to implement system of collection wouldn't hurt our online efforts but it has to be fair, consistent and easy.

Hope your weather is a bit better in NC than what I've seen on the weather channel. I will be driving through on the way to Florida next week and don't want any problems! Spring baseball is around the corner.

[DavidL]

Not to go to far off topic but the weather is fine here if not a bit chilly, no snow here. Hard to believe pitchers and catchers are reporting already.

[stelan02]

Greetings taxpayers.

I've been working on a site with a friend and ran into the tax issues with California. I do not claim to be a programmer, but I do what I can to get things working the way they should. Anyway, I have come up with a zip code table and edit for Prestashop to use specific taxes for cities, counties and zip codes. I have written a two page set of instructions on how to get the zip codes, create the table and update it with specific counties. Also included is the edit for the tax section in Prestashop. I will make these available if there is anyone interested.

First, check out the site I am working on to verify for yourself that the tax table is working, at least for Orange County, CA. There are 48 zip codes in the county, here are a few of them - 92868, 92856, and 92864. Use a zip code from another CA county, which will be at 8.25%, then try the previous zips which are .5% more.

http://www.bytesizeapps.com/flotho/nsa/prestashop/ (We will be deleting all customer accounts before the site is finished.)

Any comments are welcome, especially if there is an error. Be nice, it's my first post.

[Yoda]

Greetings taxpayers.

I've been working on a site with a friend and ran into the tax issues with California. I do not claim to be a programmer, but I do what I can to get things working the way they should. Anyway, I have come up with a zip code table and edit for Prestashop to use specific taxes for cities, counties and zip codes. I have written a two page set of instructions on how to get the zip codes, create the table and update it with specific counties. Also included is the edit for the tax section in Prestashop. I will make these available if there is anyone interested.

First, check out the site I am working on to verify for yourself that the tax table is working, at least for Orange County, CA. There are 48 zip codes in the county, here are a few of them - 92868, 92856, and 92864. Use a zip code from another CA county, which will be at 8.25%, then try the previous zips which are .5% more.

http://www.bytesizeapps.com/flotho/nsa/prestashop/ (We will be deleting all customer accounts before the site is finished.)

Any comments are welcome, especially if there is an error. Be nice, it's my first post.

I am interested for your tax table. I tested it, and I think it works. If you can release it to the community, that will be nice. Thank you for sharing it.

[stelan02]

Hi Yoda,

Here are the instructions. You will be creating a sql statement to create the new table and another to update the table. Let me know if you need any help.

Steve

Prestashop_Zipcode_Table.pdf

[Yoda]

Hi Yoda,

Here are the instructions. You will be creating a sql statement to create the new table and another to update the table. Let me know if you need any help.

Steve

Great. I am in Orange county too. I will follow your instruction to make the table. Thank you for sharing.

[diamond204]

I have just been testing version 1.3.0.5 and it has made a good stride in the direction of fixing US Tax issues - it now has the ability to change a setting on how tax is calculated :classical, inferior, and superior.

US should be superior. In the shopping cart, all is calculated correctly.

But................

When the data is passed along to Paypal using the built-in version 1.6 plugin, the calculations go bad. Why? Because the Presta team has created the Paypal module to pass along products bought + cost and that is it. That may work for Europe and many other areas because their sales tax is based per item - in the US, it is based per transaction...

So in the US (more specifically in California) you cannot pass along $1.50 product x .975 tax, with tax each is 1.65 x 100 pieces = $165.This is what the Paypal API currently does (v1.6) and is INCORRECT and not valid in the US.

It would be great if the Paypal module could just pass along the $1.50 product with no tax attached to the product price. It would pass along $1.50 product x 100 pieces = $150 / after totaled, assess a 9.75 % sales tax in California = $164.63 total (these figures do not include shipping which is usually not taxed in the US).

Perhaps this may not be possible or easy to impliment in the current Paypal module, but perhaps a new one can be created "Paypal with transaction based taxes" etc. ?

Any ideas anyone?

[dgf15215]

Diamond - while I can't speak to other states or municipalities, I assure you that in the Commonwealth of Pennsylvania shipping costs are fully taxable. Shipping is considered an intrinsic part of the selling price whether included in the selling price or added as a separate line item.

[diamond204]

Diamond - while I can't speak to other states or municipalities, I assure you that in the Commonwealth of Pennsylvania shipping costs are fully taxable. Shipping is considered an intrinsic part of the selling price whether included in the selling price or added as a separate line item.

Correct- shipping is taxed in some states / areas in the US

[fallenleader]

hate to steal the topic, but just a quick question.

i have to finish building and launch my shop before the end of September, we charge taxes for NJ, usa. in order to do that, i will have to wait for a new version of prestashop to be able to do this?

[diamond204]

You can disable taxes in Prestashop, and use Paypal as a payment gateway - they can calculate tax within their system (after you set it up initially).

[fallenleader]

thanks, i'll look into that.

[popres]

What a nightmare with all these VAT rules. You American merchants, how much total taxes do you pay ?

Say in one month you sell for 5.000$, total costs were $2.000 with a profit of $3.000, how much of that money will Obama get and how much can you put in your pocket ?

In Sweden it would be first VAT 20%, and then around 50% on top that in total taxes, leaving you with ~$1300 left.

[diamond204]

popres - in the US it depends on many factors, but in general, you would pay quite a bit less in taxes. It really depends on how much profit you make in a year, and how many expenses/losses you can deduct. But I would say at top you would pay about 50%, low end if you are not selling large amounts or are a new business, 15-20%.

[Melinda]

subscriptions not taxable - other products are taxable

Hi,

svn 2548 1.4.0.1

A new store that sells subscriptions that are not taxed along with other physical and downloadable products that are taxed is not possible with prestashop.

An ability to set any products to be taxed and other products to not be taxed is needed.

It is confusing to the store owner to see that tax gets charged now even when a product is set to "No Tax" and the tax schedule is setup.

The only alternative is to disable all taxes to keep subscription products from being taxed but then you lose the tax on the other products.

Thanks!

[GotLiveChat.com]

I thought Prestashop was designed more for products vs. services?

[Matthieu Biart]

Hi Melinda!

I think I missed something since it looks like you could simply create a product called "subscription" with "no tax" associated and have the tax you want associated to your other products.
It that way you can have in your cart both subscriptons (tax exempted) and products (tax charged).
Please correct me if I misunderstood something.

[Patric]

Topics merged.

[michelcock]

I think I have found where the issue lies. You computation for tax is your right. The issue lies in the order in which the computation is completed and who's data is passed to Paymaster is federal sales or use tax in the United States. All five states impose sales and use taxes on the retail sale, lease and rental of many goods, as well as some services.

[cathyneff]

Glitch

 

There is much discussion on Bug Tracker about a glitch in the United States sales tax configurations and how there is no remedy for it, but I don't see many postings here. Here is the issue that I am currently having.

 

I configure my tax laws and tax rules correctly for a state tax in the United States, but when I apply that tax to a product, the pre-tax price and post-tax price remain the same; the tax rule is not applied.

 

I thought this may be in my configuration of the taxes and spent many hours watching training videos, reading documentation, and reconfiguring over and over again. However, when I tried the module "Shop Manager" for Prestashop which imports your shop information and for you to manage offline, that program displayed my taxes correctly with my tax settings. But when that information went back into Prestashop, the tax was gone.

 

Obviously there is a bug in the US state sales application somewhere in Prestashop. Has anyone else had this problem, and if so, how did you solve this problem? Thanks.

[Wilson House]

I have a possible solution to the county tax issue in many states of the US that maybe someone has already tried and failed, I certainly have spent many, many hours looking through the forum to find a solution to my North Carolina sales tax issue. I have to collect, report, and pay county sales tax for every county I ship a product to in North Carolina.

 

Here's my thought and I hope someone can tell me if or how this might work, I have not been able to get it to work yet.

 

I have created a new state. NC - Henderson County. I have created a "Taxes" tax "Sales Tax - NC - Henderson Cty". I have created a tax rule "NC - Henderson County (6.75%)". When entering my address I selected as my state from the drop down list "NC - Henderson County". Should this not calculate sales tax on the state that I set up with the taxes that I set up?

 

What are your thoughts, ideas on whether this might work or how we all might get this to work?

 

Jay

[Wilson House]

I have a possible solution to the county tax issue in many states of the US that maybe someone has already tried and failed, I certainly have spent many, many hours looking through the forum to find a solution to my North Carolina sales tax issue. I have to collect, report, and pay county sales tax for every county I ship a product to in North Carolina.

 

Here's my thought and I hope someone can tell me if or how this might work, I have not been able to get it to work yet.

 

I have created a new state. NC - Henderson County. I have created a "Taxes" tax "Sales Tax - NC - Henderson Cty". I have created a tax rule "NC - Henderson County (6.75%)". When entering my address I selected as my state from the drop down list "NC - Henderson County". Should this not calculate sales tax on the state that I set up with the taxes that I set up?

 

What are your thoughts, ideas on whether this might work or how we all might get this to work?

 

Jay

 

I did get this to work by adding the NC - Henderson County tax to the product. Now my problem is how do I set Prestshop to charge any or all taxes for North Carolina. It only lets me select one tax for the product. How do I get prestashop to charge taxes based on location rather than on what tax is selected with the product? Can I just tell Prestashop the product is taxable rather than telling it what tax to charge for the product. Sales tax should be calculated based on shipping address not on the product. Thoughts?

[Matista19]

Thanks for all this informations

[tis-marketer]

Hi Yoda,

 

Here are the instructions. You will be creating a sql statement to create the new table and another to update the table. Let me know if you need any help.

 

Steve

 

Hi there, is this still working for the latest update? We need this badly since we dont have any programmers in our website. Please help us.

[ddmbrands1]

Hey Wilson, did you figure this out yet? I am having the same issue!

[ddmbrands1]

Hi there, is this still working for the latest update? We need this badly since we dont have any programmers in our website. Please help us.

Did you figure out if this still works?

[tannerS]

I did get this to work by adding the NC - Henderson County tax to the product. Now my problem is how do I set Prestshop to charge any or all taxes for North Carolina. It only lets me select one tax for the product. How do I get prestashop to charge taxes based on location rather than on what tax is selected with the product? Can I just tell Prestashop the product is taxable rather than telling it what tax to charge for the product. Sales tax should be calculated based on shipping address not on the product. Thoughts?

 

I can only imagine what a headache collecting taxes for each county would be. I'm glad my state doesn't do that. I only have to pay state tax at a fixed rate and a county tax that is based on a hard to understand schedule. I get taxed on all equipment and materials etc. from the county plus net income.

 

I just wish it all was a flat tax, but then CPA's would not have a job and the gov wouldn't need to be so large. People need jobs an all. Everyone should have to pay taxes as a business owner, I bet things would change also if you had to right a check for taxes each week out of your paycheck. Payroll taxes, sales taxes, income taxes, regulation taxes, DMV taxes, county property taxes, county sales taxes, utility taxes, fuel taxes, used tire fees, used battery core fees, license renewals, dog's have annual fees and medical shots and so many more. Americans pay more taxes than they realize! Just look at a telephone bill and all the fees and taxes.

[Dh42]

this can solve the problem, http://www.avalara.com/e-commerce/prestashop

[everything4scrapbooking]

this can solve the problem, http://www.avalara.c...erce/prestashop

 

Sadly this seems to be a pay service and they won't even tell you how much they charge without excepting a sales call from them. Can anyone tell me how to just not ship to my state. I can worry about trying to work out all the ship by county stuff later. For now I woudl rather not just ship to my state and fix the taxxes when I have more time.