Here's Why You Should NOT Charge Sales Tax for Your Paparazzi Jewelry
Last April 2020, Shopify announced an overhaul of their tax functionality for their stores.
"Simple, clear, and accurate US sales tax setup" is what they called it. Many Shopify customers and Shopify Partners disagree. The email from Shopify read:
April 06, 2020 Admin
Collecting sales taxes in the United States 🇺🇸 has gotten easier. Tell Shopify where you’re registered for sales taxes, and Shopify automatically determines the tax to collect on orders.
The following details apply to this update:
- Rounding on orders is now at the line level.
- Adding a location no longer automatically turns on tax collection for the state where the location is located.
- Tax overrides are applicable at a state level only, allowing you to easily exempt products that shouldn’t be taxed.
- Add registrations for states where you don’t have a location but where you have an economic nexus.
- Select between destination and hybrid origin sales tax in California.
This feature is available to most merchants selling within the United States. Learn more about US Tax Registrations from the Shopify Help Center.
Simpley put, one of the byproducts of this overhaul was the removal of Base Tax overrides for each US State. Previously, a store owner could collect sales tax on their own using a series of overrides which allowed tax situations, like the ones Paparazzi Consultants find themselves in.
As you know, Paparazzi consultants pay sales tax on the RETAIL price of the $5 jewelry. Then, when they sell it to a customer, they attempt to recoup that sales tax payment through each sale—similar if you were to show up at their vendor booth and purchase the items in person from the consultant.
However, as of August 18th, 2020, the option for any user, including Shopify Partners like ShopaSetup, to override the Base Tax rate for each city is no longer available.
So, what now? Well, that brings us to the TITLE of this article and "Here's Why You Should NOT Charge Sales Tax for Your Paparazzi Jewelry."
The reason? You'll be able to sell the jewelry CHEAPER than other Paparazzi consultants.
And, what do you do with the LOST REVENUE that you just experienced because you could not recoup your sales tax? You may be able to deduct it off of your Schedule C as a business expense as a fee. Check licensing and fees.
Gain an advantage over other sellers by being able to charge LESS.
Make a BIG DEAL about it, too. "NO TAX ON PURCHASES" is a something to talk about.
Please note: This blog post is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your Paparazzi business, contact a tax professional in your area.