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    Taxes by Vendor> State Presence

    Ok, I don't deal with this stuff normally so hopefully explain it correctly.

    We have certain vendors, with a presence in multiple states. If someone in that state buys that vendors product from us (we are in California they are in Georgia let's say) they should be charged sales tax in that state. If they buy another product from us, and that vendor does not have a presence in that state, then they do not pay tax on it.

    Is there a Miva addon of some sort that allows me to set up a scenario like this or do I need to do custom programming?

    #2
    Re: Taxes by Vendor> State Presence

    There are Miva addons that can help you with this but it may not be the best strategy.

    It may be better to charge additional shipping to Georgia or just eat the tax your drop shipper is charging you.

    I am not familiar with Georgia revenue law but if they are like most states you will need a license to collect their sales tax. Registering your business to collect Georgia sales tax exposes your business to the liability of inaccuracies and omissions. If your forms are not filled out accurately or the tax not transmitted on time you subject yourself to a sales tax audit.

    Each of your products need to be tax-coded to charge the correct rates and both your bill to and ship to addresses will have to be validated on the OCST page (hopefully the address validation servers don't time-out on you).

    There is no law that says you have to collect GA sales tax so the simpler and best strategy is to reflect the true cost in the shipping calculations.
    http://www.alphabetsigns.com/

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      #3
      Re: Taxes by Vendor> State Presence

      Thank you. I was misunderstanding. I thought that the owner was concerned about the 'legal' issue of collecting tax in those cases but from what I read (if I understand correctly) the legal obligation of collecting the taxes actually falls to the company in that state, who has the presence, and who is shipping on our behalf. So the issue is that they are billing us for the tax and we just need to recover the cost in which case padding the shipping works. Thanks!

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        #4
        Re: Taxes by Vendor> State Presence

        Unless you are in CA...which, for a while, was trying to collect taxes from those in other states who's products where sold in CA...but I think that nonsense died quickly. :)
        Bruce Golub
        Phosphor Media - "Your Success is our Business"

        Improve Your Customer Service | Get MORE Customers | Edit CSS/Javascript/HTML Easily | Make Your Site Faster | Get Indexed by Google | Free Modules | Follow Us on Facebook
        phosphormedia.com

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          #5
          Re: Taxes by Vendor> State Presence

          Gosh what a headache I'm getting. My boss told me that we are technically resellers for that vendor and that we need the line item for Sales Tax in case the vendor in question is ever audited - which means I can't just add it to the shipping. I spoke to the guys with the AccurateTax module and they say I can do it by creating a default class for all of the products and a second class for those products that need the special treatment. I'm going to request a demo.

          My hat is off to guys who like accounting; my cranial lobes are throbbing from the little reading I did so far. Not my cup of tea.

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            #6
            Re: Taxes by Vendor> State Presence

            My boss told me that we are technically resellers for that vendor and that we need the line item for Sales Tax in case the vendor in question is ever audited.


            Maybe there is more to your boss's specific issue but being a reseller doesn't create a state nexus for your company.
            How does the line item serve any useful purpose to your vendor's state audit? Even worse, signing up for the Streamlined Sales Tax exposes your boss to state audits.

            Maybe collecting sales tax sounds like a great revenue enhancement idea in the short run but your boss is exposing his company to audits. The classifications can be very subjective and that is where audits can get you in trouble. A read a survey where tax audits are more dreadful than a divorce. Why does your boss want to put his company in jeopardy of a tax audit?
            http://www.alphabetsigns.com/

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              #7
              Re: Taxes by Vendor> State Presence

              Since you are probably the technical guy that needs to provide research for your boss there are some technical issues that are involved in collecting multistate sales tax.

              The address needs to be validated on the OCST page. Most of the SAAS services will charge per address validation weather the customer checks out or abandons the cart. They also charge to validate both the bill to and ship to address even if the addresses are the same, kind of like double dipping. So for your example, your boss will have to pay twice for a customer who's just checking a bottom line price whether they are from Georgia or not. If the customer is from Georgia then your bottom line price will be about 4% higher because of the sales tax, 8% higher with max local surcharge but that depends on the rooftop address validation and the product classification.

              You still have to pay both address validation charges weather the customer is from a state you are collecting taxes for or not.

              Another technical issue is that there are several address validation databases and they are not all 100% accurate or in sinc. So a USPS address validation database may not have street addresses for UPS deliveries. This can cause the customer confusion to have to wonder why their address isn't valid and another chance for the customer to abandon the cart.

              A third technical issue is how do you provide rooftop address validation for third party payment providers (TPP) like Amazon Payments or PayPal Inline where you don't control the address book? If the address is not correct then your boss may fail a tax audit. As mobile and TPP becomes more popular it may be more difficult for you to provide accurate address validation although your boss will still be on the hook for it.

              The tax is calculated PostAction to the OSEL page. Any delay in making the third party call to calculate the tax increases the chances of your customer abandoning the sale. The fewer third party calls you make during the checkout, the safer you are. I'm not sure but I am curious what your boss's PCI liabilities are if the third party server is scraped.

              These are just a few technical issues of address validation but I don't want to minimize how subjective product classification and its maintenance can be. State and Local changes to product classifications are a subjective maintenance nightmare and your boss will have the increase cost and burden of maintaining that database.
              http://www.alphabetsigns.com/

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                #8
                Re: Taxes by Vendor> State Presence

                Oh I forgot two other sales tax collection issues - exempt customers and sales tax refunds.

                I use a custom customer field to flag a customer as tax exempt. The customer must first email us a tax exempt certificate that we must keep on file in case we are ever audited. Unfortunately, most tax exempt customers don't have their certificate readily available during check-out. If they do have it they can't send it in a digital format that we can easily manage. So we usually have the increase cost of scanning and managing tax exempt certificates. Your boss will be liable to manage the tax exempt certificates of all the non-taxable customers in all the states he is collecting sales tax for. Some of them will have to be updated annually.

                The non-taxable customer or their representative will have to remember to be logged in during checkout for the cart to know to not collect sales tax. Forcing a customer to log in before check out is a barrier to conversions.

                So many of our tax exempt customers will go ahead and check out anyway, mail us their tax exempt form and demand the sales tax refund even after we have done the reporting and submitting of the tax to the state. We use to try to explain to the customer that we did not charge the sales tax that we only collected it for the state and that they can request the refund from the state because that is who has it. As you can imagine that is a time consuming customer service nightmare. So many times we just refund the sales tax that we already sent to the state and eat the loss.

                We also have to issue refunds for customers who have changed their mind and call to cancel their order. Issuing a full refund is easy with Miva but there is the extra task of massaging our sales tax reports so we don't submit tax for any cancelled orders.
                http://www.alphabetsigns.com/

                Comment


                  #9
                  Re: Taxes by Vendor> State Presence

                  Originally posted by alphabet View Post
                  Most of the SAAS services will charge per address validation weather the customer checks out or abandons the cart. They also charge to validate both the bill to and ship to address even if the addresses are the same, kind of like double dipping. So for your example, your boss will have to pay twice for a customer who's just checking a bottom line price whether they are from Georgia or not. If the customer is from Georgia then your bottom line price will be about 4% higher because of the sales tax, 8% higher with max local surcharge but that depends on the rooftop address validation and the product classification.

                  You still have to pay both address validation charges weather the customer is from a state you are collecting taxes for or not.
                  I can only speak for AccurateTax and not other SaaS providers, but I want to correct a couple of incorrect assumptions in this section.

                  1. Our service only scrubs the shipping address, not the billing address. There's no "double dipping" as described.
                  2. With our module, there's a setting where you can choose to scrub all shipping addresses, or just shipping addresses in states where you've declared that you have a nexus (for which you're collecting sales tax, in other words).
                  3. For us, the issue of an abandoned cart as described at the beginning of this quote depends on the package you're using. For our Advanced service, this is true - the call is charged to your account when placed, regardless of whether they complete checkout or not. But our Enterprise service is based on completed orders only, because of the extra step of committing the order when it's placed for reporting capabilities. (The Enterprise service has a higher per-call rate, of course, because of the additional features.)

                  I'm glad you've given us a call already. If there's anything else we can do to help, please let me know.

                  Thanks,
                  Susan
                  Susan Petracco
                  NetBlazon

                  1.866.400.2444

                  _____________________________________________

                  Like us on Facebook

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                    #10
                    Re: Taxes by Vendor> State Presence

                    Hi Susan,
                    Thank you for clarifying how your service is differentiated. Netblazon has a great reputation among module developers so it doesn't surprise me that you have responded with great features. I should also say that there is a need for tax reporting services especially for a merchant with a large sales tax footprint.

                    My response is focused on the business strategy aspect of hebrue’s question and not just as a technical issue. Each merchant needs to arrive at their own conclusion but they should be aware of the true costs and liabilities of state nexus and not proceed with willful blindness.

                    In hebrue’s example, his boss can volunteer to collect Georgia sales tax and sign up through the StreamlineSalesTax (SST) organization or its Certified Service Providers (CSP). He could also opt to contact Georgia directly for a Tax ID.

                    If he signs up through the SST then he not only has to collect sales tax for Georgia but must collect and remit sales taxes on all taxable sales for the SST member states. There are currently 23 member states representing about a third of the US population. That’s a lot of address validations and abandoned carts! This requirement also expands to all the states that join the SST in the future.

                    If hebrue’s boss doesn't want to collect sales tax for all member states and decides to register for a Tax ID directly with Georgia then he exposes his business to unlimited liability in tax audits. (If he signs up through the SST then there is limited liability in a tax audit.)
                    http://www.alphabetsigns.com/

                    Comment


                      #11
                      Re: Taxes by Vendor> State Presence

                      Thank you for the compliment! :)

                      I completely agree with everything you've said in regards to OP's solutions. I think it's a choice between a variety of headaches, unfortunately.

                      Susan
                      Susan Petracco
                      NetBlazon

                      1.866.400.2444

                      _____________________________________________

                      Like us on Facebook

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