CandleScience Collecting Sales Tax

amd · Jan 15, 2019

I got this email today and thought I would share - just in case a member here purchases from them and doesn't use a login or sign up for their newsletter. (I'm not sure what criteria they used for sending out the email.) Of particular note is that they do provide the link for setting up the tax exempt account.

From the email:
Due to the Supreme Court ruling in South Dakota v. Wayfair, we will begin collecting sales tax on all orders shipping to your state effective January 24, 2019.

If you are not exempt from sales tax, you will see sales tax collected on your orders beginning January 24, 2019.

If you are exempt from sales tax in your state you can submit your resale or tax exemption documentation here. You must be logged in to your CandleScience account to access the form. Customers who submit documentation will receive email confirmation of their status on January 24.

Our compliance team is standing by to answer any questions you might have. Give us a call, shoot us an email, send us a text. We’re here to help.

- The CandleScience Team

DeeAnna · Jan 15, 2019

I've been researching this for my own business -- there is a massive amount of confusion about this from what I can tell. The best summary I found of the latest rules is here: https://taxfoundation.org/post-wayfair-options-for-states/

Many states have recently passed rules that require retail sellers to pay state sales tax on their interstate sales if the sellers meet certain requirements. This is due to the Wayfair court ruling in mid 2018 as mentioned by Amd.

The way I see things, many states now want sellers to pay sales tax IF the seller has done over $100,000 in sales in that state in the previous 12 months OR if the seller has over 200 transactions in that state during that time. (This is a general observation from the list I compiled today -- many but not all states do this!) These limits will save small businesses like me from having to submit a whole raft of sales tax forms each and every year. Here's an example --

So I'm located in Iowa. I just got done paying 7% Iowa sales tax on the $425 in retail sales I did in 2018. Makes no difference how much or how little I sell within my home state -- I will always owe sales tax.

On the other hand, I had $800 in a total of 10 interstate retail sales to the state of Georgia this past year. Georgia's new rule sets the limit for paying interstate sales tax at a minimum of $100,000 in sales or 200 transactions. That means I don't have to pay sales tax to Georgia for 2019.

About 37 states have adopted some type of interstate sales tax requirement so far, with more coming soon. It's the wave of the future in interstate commerce whether we like it or not.

As far as sales tax exemptions go -- You will qualify for a sales tax exemption if you sell at wholesale to retail outlets (who collect the sales tax from their customers) or if you retail directly to the public (so you collect the sales tax from your customers). This type of exemption doesn't usually apply to materials consumed in-house, only to materials incorporated directly into the products you manufacture. For example, you will probably pay sales tax on the soap pot or stick blender you buy for use in your shop; the coconut oil you put in your soap will be tax exempt.

Carl · Jan 25, 2019

Some questions that remain:

How would someone know ahead of time if they will make 200 transactions in that particular state? Let's say I live in PA and made 150 transactions last year to Iowa. Now it's Jan 1st and I estimate that I will make 175 transactions this year in Iowa (business growth). So I decide to NOT collect the Iowa tax since I will not make 200 transactions. Now it's December 31st and I had a better year than expected. I made 250 transactions in Iowa. Now we have a problem. I didn't collect tax all year long.

In the situation above. I live in PA which was traditionally an Origin state for sales tax. I only made 150 transactions in Iowa, therefore no responsibility to Iowa. But does, PA now want me to submit the 6% to them since nothing was paid to Iowa??

The other place this could get interesting is with the returns (maybe only applicable to larger sellers). But let's say I make 200 plus transactions in multiple states. Do I need to register and file a return in each state? This could be a paperwork nightmare!

amd · Jan 25, 2019

@Carl I think you would have to file a tax form for each state you sold in at the end of the year. Hopefully your pricing is set right to offset paying the sales tax. I factor in SD sales tax when I set my prices so I don't charge a separate tax fee, tax is included in the price. So I have a few soaps that COG (cost of goods) is $1.08, I take that x4 = $4.32 + 6.5% sales tax (technically SD state is 4% but I also have to add in city sales tax which varies from 2% to 3%, so I average with 2.5%) = $4.60. I round up to an even $5 and I've got all my bases covered. Just make sure I don't spend that money before I file taxes!

But... I didn't post this originally regarding us (soapmakers) paying tax as sellers, but us as buyers - we don't have to pay sales tax on things that we buy for our products that we resell and pay sales tax on. I was making it aware to soapmakers who might not get the CandleScience emails and have the tax exemption that they should file with CandleScience to get the tax exemption. I've had to do it now with CandleScience and Online Labels. I expect other suppliers will be following suit in the coming year so that they can properly tax personal use buyers.

DeeAnna · Jan 25, 2019

"...How would someone know ahead of time if they will make 200 transactions in that particular state?..."

You don't have to know that. I wrote earlier "...the seller has done over $100,000 in sales in that state in the previous 12 months OR if the seller has over 200 transactions in that state during that time..."

So to say it again, the deciding factor, the way I read things, is not your prediction of future sales, it's based on sales already made. So if in 2018, you made 210 sales to Iowa, then you'd collect Iowa sales tax on your 2019 sales to Iowa, even if you only make 175 sales in 2019. I might be missing the nuances, but that's the general idea the way I read things.

"...But does, PA now want me to submit the 6% to them since nothing was paid to Iowa??..."

You need to check with the state to know what they expect. If PA has used origin-of-sale as the basis for paying sales tax, you may well be correct.

"...But let's say I make 200 plus transactions in multiple states. Do I need to register and file a return in each state?..."

Yes, that's correct. Yes, you're right it will be a hassle. But if you're doing well enough to have 200+ transactions or $100,000 in sales for a bunch of states, you can probably pay an accountant to do this work for you.