Collecting Sales Tax
- In this lesson, you will learn:
- Where you need to collect sales tax (0:17)
- What is Nexus (0:33)
- How to collect sales tax for your store (1:24)
- Exclusive vs. Inclusive sales tax (1:58)
James: Setting up Sales Tax collection on your Bigcommerce store has never been easier, thanks to our partner Avalara. Now you can enter any state where you need to collect sales tax, and you’re immediately collecting the correct sales tax rate for your store.
If you’re new to this, I already know your next question. “What states do I need to collect sales tax for?” Generally, for startup businesses you only need to collect sales tax in your home state. Sales Tax is a state regulated tax. It’s not federally collected, so you’re only responsible for charging sales tax in states where you have “nexus”. In the tax world “nexus” means, “a connection to the state”.
So if I have nexus in Texas, I need to collect sales tax on all my orders that I ship within Texas, however if I ship to Oklahoma, where I don’t have any connection to that state, I don’t need to charge those customers sales tax. No nexus - no sales tax.
If I were to open a branch of my business in Oklahoma I can be sure I would be granted Nexus by Oklahoma. If you’re ever unsure every state or country has a Tax department that you can contact. We highly advise contacting them - they are the professionals!
Fortunately, if you do need to collect sales tax, Bigcommerce and Avalara have made it incredibly easy for you to setup.
Start by going into your store settings and select...tax.
Upon first entering your Bigcommerce control panel, hopefully you entered your business address in the tax area of your Getting Started page. Bigcommerce uses this address to auto-populate your home state, and collect the right sales tax. We see here, I have Texas present. This means I’m collecting Sales tax in Texas. So if anyone ships their order to Texas they’ll be charged the correct Texas Sales Tax rate. If you have nexus in multiple states you can easily add them into this field.
Use this field if you need to change the “Sales Tax” display name that shows at checkout.
Below you have the option to add product prices inclusive of tax or exclusive. Most U.S. stores choose exclusive. This means tax will be added to your product price during checkout. If you choose inclusive you’re telling Bigcommerce and Avalara that you don’t want to charge an extra sales tax rate on top of your product pricing.
If you mark taxes to be “inclusive” your customer will pay $29 and you’ll have to account for the Sales Tax from your product price sale. Bigcommerce will still show you the Sales Tax rate on each order, so that you can pay your state government the correct amount at tax time, but it will come out of your product pricing; not be added to the product price at checkout.
Choosing “exclusive” adds the correct sales tax rate on top of your Product price, so if you charge $29 for a hat, the customer will pay $31.39. If you plan accordingly, this will allow you to set aside the $2.39, and pay your state the sales tax on all your orders.
If you have advanced sales tax needs like tax-exempt customers or special taxable items, we can handle it, but your best bet is to talk to our Tax Specialist partner: Avalara. You can register or learn more, right here.