California not only has some of the nation’s most challenging sales tax laws, but they technically allow you, as a merchant to use one of two different methods to calculate sales tax.
First, the default/expected method if to use modified origin, which California sales tax rules.
The second option is to use full destination-based calculation, where you charge the rate based on the delivery address of the buyer. In this scenario, what you are effectively doing is collecting your sales tax component (the 7.5% state and county taxes for outside your area) and the customers’ use tax obligation (all local taxes) on their behalf.
To date, TaxJar has defaulted to modified-origin for all California merchants, including those who use Magento Sales Tax Automation to import rates. However, with our most recent release, you can choose to override the default, and switch your “sourcing” method to the one that best fits your business. Ex: If you sell on FBA, your best bet would be to use TaxJar with “destination sourcing.”
As you can now see in our California Sales Tax Report, we show the sourcing method.
Simply go to the state page to edit this setting…
If you do make a change, TaxJar will need a few minutes to re-calculate all of your sales tax by jurisdiction. You will receive an email when that is complete.
Note, this new setting applies not only to the Sales Tax Reports in TaxJar, but also to any rates that are imported into Magento Sales Tax Automation, as well as any calculations made via Woo Commerce Sales Tax Automation or the TaxJar API.
Important: For customers making calculations through our TaxJar API, it would be wise not to change sourcing method after you have been making calculations. For example, you would not want to calculate sales tax using a destination-based sourcing rule, then report to the state using modified-origin. Best to be consistent.
Questions or comments? Start the discussion below.