Sales Tax 101 WooCommerce

WooCommerce Sellers’ Guide to Sales Tax Rates

by Mark Faggiano

WooCommerce sales tax

So you’ve got your WooCommerce store all set up and you know you need to collect sales tax in customers in the state (or states) where you have sales tax nexus. Now how much sales tax do you charge?

We have your answers and one simple solution for WooCommerce sellers that will eliminate your need to keep track of all this complexity!

Sales Tax 101 for WooCommerce Sellers

Forty-five states and the District of Columbia all require merchants to charge sales tax to buyers. That’s the given. But from there, how much sales tax you will charge varies greatly. In some simple states (and there aren’t many states with simple sales tax rates!), you may charge every buyer in that state one statewide rate. This is generally from 4-8%.

Example: So if you live and operate your business in Connecticut and make a sale to a buyer all the way across the state, you would only charge that buyer Connecticut’s 6.35% state sales tax rate.

But most states not only have their statewide state sales tax but also allow localities to also add sales tax rates.

Example: For example, in the 90210 zip code, the tax rate is the 6.5% California statewide rate, a 1% Los Angeles County rate, and an additional 1.5% local rate, for a total of a 9.0% sales tax rate. (Hint: You can check tax rates anywhere with TaxJar’s Sale Tax Rate Calculator.)

Sounds complicated right? If you have sales tax nexus in a state with local sales tax rates, your problems are just beginning.

Some states are origin-based sales tax states while some are destination-based states. The only thing simple about this concept is the definition.

Origin-based sales tax states – If you live and operate your business in an origin-based state, you get to collect sales tax based at your location. If you only sell from one location, you’d always collect just your location’s sales tax rate. (You can look that up right now by clicking over to taxjar.com/mobile.)

Destination-based sales tax states – A majority of states are destination-based sales tax states. If you live and operate your business in one of these states you will charge sales tax based on the rate at your buyer’s location.

Example: You operate your business out of your home in Lenexa, Kansas, which has a total sales tax rate of 9.75%. (That’s the Kansas state rate of 6.1505, plus the Johnson County rate of 1.225%, a special local tax of 1.375% and a district rate of 1%.) But you sell to a buyer in neighboring Shawnee. Because the sales tax rate in Shawnee is 9% you would only charge 9% to your buyer.

To make matters worse, some states treat in-state seller and “remote sellers” (sellers based out of state) differently.

For the most part, if you have sales tax nexus in a remote state (i.e. a state where your business isn’t based but you must charge sales tax for some other reason) then you would charge sales tax using destination-based rules. The only exceptions to this rule are Arizona, New Mexico and the very complicated state of California. (Read our California sales tax guide for more about this “modified-origin” state.)

Sounds daunting, right?

Master WooCommerce Sales Tax with the TaxJar Plugin

You could sit down with Wikipedia, a sales tax table and your state’s department of revenue on speed dial, or you could simply let TaxJar handle sales tax rates for you.

The TaxJar sales tax automation plugin for WooCommerce will ensure you’re collecting the correct amounts of sales tax, even if you have to collect from customers in multiple states. It also:

  • Offers US and Canada sales tax support
  • Automatically tracks how much sales tax you’ve collected, down to the county, city or special tax rate
  • Files sales tax returns directly to the states (in 26 states and counting)!
  • Supports WordPress 4.0 and WooCommerce 2.0+

Here are quick and easy instructions for installing the TaxJar sales tax automation WooCommerce plugin.

Do you have more WooCommerce sales tax questions? Check out our comprehensive Sales Tax 101 for WooCommerce Sellers Guide for more, including:

  • How to determine where you have sales tax nexus
  • How  and when to register for a sales tax permit
  • How to set up sales tax collection using the TaxJar plugin for WooCommerce
  • How to figure out how much sales tax you’ve collected
  • How to file sales tax the easy way

Or start the conversation in the comments!

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