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Charging State Sales Tax

I have set up my shop to charge CA state sales tax because I live in CA. I just made a sale to a person in Hawaii. Etsy did not calculate the amount of the sales tax for the buyer. When I emailed Etsy to find out why, they sent me an email that stated: "Sales tax will only be applied to states or countries the item is being shipped to. For example, if you collect taxes for the state of California, then the site will only charge tax transactions being shipped to California. Because the item you shipped went to Hawaii there was no sales tax incurred." This makes absolutely no sense. When I sell something from here, I charge sales tax, because the State of California wants their money. If you used Etsy's logic, you'd have to know the tax of every single state and country in the world in order to set up your account........and how could you possiby know where a buyer is from in advance?

Interestingly, the email contained PayPal's phone number, but not theirs. When I asked for a phone number to talk to someone, I was told: "Unfortunately, we're not equipped to offer phone support at this time. If you would like further information regarding sales tax in your state, you will need to get in touch with an accountant. They should be able to provide you with the information that you're looking for".

Aaargh. Has anyone else had this problem? Am I missing something?

38 Responses

wait... I thought we only collect sales tax from people within our state not everyone? :o
You have to charge CA tax to fellow residents of CA.

You don't need to worry about other places at all.
You are correct Rude.

You only collect sales tax for items sold within your state.
It's like when you shop at an online store. If they have a physical location in your state, you are charged tax. If they don't, you aren't.

You are located in California. That is where your physical location is, so only people who are also located in California are charged.

California will only collect sales tax from sales sold within California (from you to other residents). If you still need more convincing, call your local tax agent or town hall for reassurance.
a Hawaiian buyer will not incur CA sales tax. only CA buyers will.
You yourself will charge sales tax for customers in CA only. All other buyers are responsible for filing their use taxes within their own state. The government is constantly trying to change that especially on the state level, the states want to get their share of the sales tax from all online vendor but it is unfeasible for the same reasons you noted. So far as I know, nothing like that is in effect.
how could you possiby know where a buyer is from in advance?

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You do not but once they pay and the STATE in their paypal address is linked up it will calculate the correct state tax. If they are outside of CA there is NO state tax. If they reside in CA it will calculate the state tax with the total order.
Etsy's response is correct - in the USA state sales tax only applies if the customer is in the state where you're registered to collect sales tax.
Wow, thanks for all the input. OK, I guess I get it, but still not clear about when I file my state sales taxes with the CA State Board of Equalization, who want to know how much I made, period. They don't care where the buyers live, only that they get their percentage of the sale, which I have to pay every January.

I have adjusteed my PayPal account to collect CA taxes, but unfortunately, this sale paid via credit card.

Thanks, everyone.

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