Sales tax is one of the most common questions we get here at WooCommerce, and for good reason. It’s a complex issue, and one that has a big impact on your business.
In this article, we’ll answer the question: “Do I need to charge sales tax on WooCommerce? ”
The answer to this question depends on a few factors, including your business location, the type of products you sell, and whether or not you have nexus in the state where your customers live. We’ll go over all of these factors in more detail below.
Business Location
Your business location is the first factor to consider when determining whether or not you need to charge sales tax on WooCommerce. If you have a physical presence, or nexus, in the state where your customers live, you will need to collect and remit sales tax.
This includes having a physical store, warehouse, office, or any other type of physical presence in the state.
If you do not have nexus in the state where your customers live, you are not required to collect and remit sales tax. However, your customers may still be responsible for paying use tax on their purchase. Use tax is calculated based on the sales tax rate in the customer’s state and is paid directly to the state by the customer.
Type of Products Sold
The type of products you sell is also a factor to consider when determining whether or not you need to charge sales tax on WooCommerce. In general, physical goods are subject to sales tax while digital goods are not. However, there are some exceptions to this rule.
For example, digital goods may be subject to sales tax in some states if they are considered “tangible personal property”.
Additionally, some states have specific laws regarding certain types of products. For example, some states exempt clothing from sales tax while others do not. You will need to research the laws in your state to determine if the products you sell are subject to sales tax.
Nexus in the State Where Customers Live
As we mentioned above, nexus is a physical presence in a state. If you have nexus in the state where your customers live, you will need to collect and remit sales tax.
Nexus can be created by having a physical presence in the state, such as a store, office, or warehouse. Additionally, nexus can be created by having an employee or contractor working in the state.
If you do not have nexus in the state where your customers live but sell products that are subject to sales tax (such as physical goods), your customers may still be responsible for paying use tax on their purchase.
In conclusion, whether or not you need to charge sales tax on WooCommerce orders depends on several factors including your business location, the type of products sold, and whether or not you have nexus in the state where your customers live. Be sure to research the laws in your state before making any decisions about charging sales tax on WooCommerce orders.
