ECommerce taxes

This is a general ECommerce question, not necessarily related to DH. However, DH is based in the state of California, USA, so all of us may be technically "California companies".

We're finding that according to the Board of Equalization we're required to setup tax tables for online sales for every county and city where taxes are different. So if we sell to someone in Ventura county, Orange county, or San Diego county, we need to identify the billing city (can't work off zip code *sigh*), charge the online customer the proper local tax, and report that back to the state. The values range anywhere from 7.25 to 9.25%.

We can't legally just charge everyone a flat rate and then figure out taxes on the back-end. We can't legally roll taxes into product as a cost of doing business because by law the consumer needs to see the full price. But I honestly don't think that 99% of website owners bother with any of this. What do you folks think?

Yes, we could charge a flat rate for the entire state but by law the consumer is responsible for differences if their local rate is higher. I'm guessing this estimated 99% of website owners probably leave the taxes to the consumer and no one including the consumer pays attention to the legalities. This would be difficult for us as our items range anywhere from $50 into the high hundreds, so discrepancies are much more likely to get noticed.

There is a further legality (getting a bit too deep here but it might be helpful for people) that if you drop ship goods from a location other than your own office, you can't leave the taxes to the consumer, you must collect all applicable taxes.

(As we go through these things we wonder if it varies based on whether it's raining or if the moon is full... perhaps we just haven't talked to the right agency.)

Do these issues not exist for companies doing business in other states? Even in TV ads we see the fine print: "Residents of AZ, CA, NE, WY add 7.25% tax..." But I never see tax being calculated based on county or down to the city level - and yet there is no doubt that there are different tax levels when the consumer and vendor are in specific locations.

Is anyone happy with their ECommerce software in this regard? Every ecommerce package is different. There are mods and patches intended to address the problem, all varying in quality. Because we're using open source software (package doesn't matter) we need to go with the flow and try to help the development rather than complain about it. Maintaining the tables is hell. We're manually entering the data and we're willing to publish the tables - I can't believe we're the only people in the world doing this (OK, maybe we are) so it amazes me that no one else already has the data that we're entering.

For better or worse our website sales portal is one "division" of our company which does other business and we are meticulous about our taxes. The more we get involved in this, the higher our "cost of business" in terms of labor and grief, and the less we're interested in this type of business at all.

All comments welcome. Thanks!!

I think how most real states work is that you charge tax in states that you occupy. That means most people will pay tax at Wal-Mart.com but not at single location businesses with a website.

It's always best to check your own states laws... and rarely a good idea to gauge how things might be based on how CA does it.

We're not all CA businesses though, just because that's where Dreamhost is. If CA ever thought that would be a good idea and passed some screwy law, every host outside of CA would be running refugee promo code specials for all the customers fleeing from their CA hosts.

Thanks for the response but we're way beyond that. Yes, we're a California company and yes the laws only apply when the consumer and vendor are in the same state. But since every vendor in America tends to do business with consumers in their own state, and some states have similar tax laws, and since many ECommerce vendors are based in California, I decided to ask the questions here before taking them elsewhere. Screwy or not, these are the laws. I'm just wondering if anyone is following them.

I think a lot of people are following them. Here's a thread from the Zen Cart forum:
http://www.zen-cart.com/forum/showthread.php?t=37081

Collecting sales tax is a huge issue in almost every state, not to mention the question of what items are taxable and whether shipping is taxable. It really does make one think that our politicians are not sensitive to small-business owners at all.

I think people say that New York is worse than California, but that might be the "grass is always greener" effect. (or in this case it's the "grass is always browner" effect)

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Thanks for your response bud.

Actually, we are using ZenCart, having evaluated others, and we are at the forefront of beating up the latest ZC module(s) and patches related to this issue. The thread you pointed to is over 2 years old and yet the problem still exists (there are many more recent threads).

What confounds me is the lack of response to this thread. I understand that a lot of people don't come here unless they have problems, and a lot of people are simply not inclined to post if they do come here. But there are a lot of people running e-businesses here, and there are a lot of California companies hosting with DH. So with full understanding that there won't be a "lot" of responses, my gut is still telling me that people are generally ignoring the problem. That's not the way I usually do math but like I said, it's my gut feeling at the moment. Oh well. We're still trying to figure it all out. If we come to a solid conclusion I'll post back.

In reply to:

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... with full understanding that there won't be a "lot" of responses, my gut is still telling me that people are generally ignoring the problem.

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I certainly wouldn't argue that you are wrong on that, but I think one of the other reasons there are likely to be few responses, is that no one wants to be a "lightning rod" for government attention on such a subject!

When, or if, the government and the lawyers start to play with your money, and the future of your "promising" web business, you might not want to have a lot of your dialog on the subject "out there" for discovery and potentially expensive embarrassment.

--rlparker
--DreamHost Tech Support