Sales (or Retail Use) Tax By State In Usa

Discussion in 'Shapeways Shops' started by lawrencekramer2014, Aug 10, 2018.

  1. lawrencekramer2014
    lawrencekramer2014 Well-Known Member
    Hi Everybody,

    I just enabled one item as a test in my shapeways store.
    I noticed something that is a legal issue.
    Since the latest US Supreme Court findings (overturn of the South Dakota ruling), retailers (that's the shop owner) are required to collect sales (or retail use) taxes for those states that have them. I do not see any setup pages for this.
    I live in Cook County Illinois (zipcode 60707) and can either collect that sales tax on all sales (the transaction occurring in that location for tax purposes), or as is more common in internet retail, apply the correct sales tax for the shipping address of the buyer.
    That requires complicated, but readily available online retail tax calculation software, based on the delivery zipcode.
    Will Shapeways automatically collect the correct tax by delivery zipcode, and pay that tax to the many states that have a retail sales tax on our behalf? This is analogous the the VAT collection for EU customers.

    here's the Etsy.com reference for comparison:
    https://www.etsy.com/seller-handbook/article/how-new-laws-impact-state-sales-tax/321914904041

    Best Wishes,
    Lawrence
     
    Last edited: Aug 10, 2018
  2. Model_Monkey
    Model_Monkey Well-Known Member
    If a customer buys one of your designs from your shop on Shapeways and the customer paid Shapeways to print it, tax collection is a Shapeways function since the customer bought the product from Shapeways, not from you. As the designer, not the printer who sold the product, you aren't the retailer. Shapeways is.

    Since you get paid a fee by Shapeways later, you are responsible for any income tax burden as a result of receiving the fee (which is your income). Shapeways does not send you a 1099 at the end of the year. It is up to you to determine what you got paid from Shapeways, whether you are required to report it, and if so, how best to do so.

    If you buy your products from Shapeways who prints them and sends them to you, then you resell the product to your customers, the tax collection burden from your sale to your customers is yours.

    Hope this helps.

    Cheers!
     
    hanelyp likes this.
  3. LoveAndShapes
    LoveAndShapes Well-Known Member
    That makes sense indeed, but how would that translate to Etsy?
     
  4. EvieL
    EvieL Well-Known Member
    Etsy currently automatically collects the sales tax on the 3 states (Washington, Pennsylvania, and Oklahoma), but you are responsible to set up sales tax rules for where you have nexus, if you are a seller in the states.
    For example, I am in NY, NYS tax are calc base on where the ship to address is located. So I set up tax rules per county in my settings in Etsy so that the buyer pays for the right amount of tax if they are base in NYS.

    If you are in the EU, I think you should consult this page. https://help.etsy.com/hc/en-us/articles/360000337247-How-VAT-Works-on-Etsy#Q4
     
    Model_Monkey likes this.
  5. lawrencekramer2014
    lawrencekramer2014 Well-Known Member
    Thanks,

    I misunderstood my role.
    I thought I was selling and Shapeways was acting as my fulfillment center; a drop-ship model I have used before.
    As an independent artist contractor, life will be much simpler.
    Maybe Shapeways could spell out the relationship more clearly in the shop setup instructions.

    Best Wishes,
    Lawrence
     
    Model_Monkey likes this.
  6. Model_Monkey
    Model_Monkey Well-Known Member
    Yes, taxation can get pretty confusing and complicated! And requirements do change over time, from location to location. Depending on the complexity of your shop and sales, it may be helpful, even necessary, to consult a tax expert/attorney.

    Shapeways began as a company in The Netherlands. As a non-US company, Shapeways did not report what they paid US-based designers to the IRS. So, for US-based designers, it is up to us to understand and meet any US federal and state tax code requirements. Depending on where you are, there may be local tax code requirements, too.

    Best wishes!
     
    EvieL likes this.
  7. stannum
    stannum Well-Known Member
    "Began." Later they opened a factory in NY and offices in other states. What is more, now it seems that it is a USA controlled operation, taking into account that HQ is in NY and descriptions say Shapeways Inc and not Shapeways BV.
     
  8. Model_Monkey
    Model_Monkey Well-Known Member
    The point is that Shapeways does not send designers 1099s.
     
  9. stannum
    stannum Well-Known Member
    But thread started about sales tax, and for taxes or forms, SW now is USA, it's doesn't matter it was NL, that is the past. (Knowing IRS, it could not matter before anyway, they will hunt national and foreign entities, at home and abroad.)

    So SW doesn't send 1099 because it's exempt for this? Or because ...*? USA company, USA designer creating IP, that suggests license/royalties.

    *: hallmarking was/is an unclear thing too.
     
  10. Model_Monkey
    Model_Monkey Well-Known Member
    Shapeways has not stated why. They just don't send 1099s to designers. Never have.

    US-based designers are obligated to understand federal, state and any local tax reporting requirements and meet those requirements.

    Depending on the complexity of your shop and sales, it may be helpful, even necessary, to consult a tax expert/attorney.
     
  11. MrNibbles
    MrNibbles Well-Known Member
    In many states it's the responsibility of the customer to pay a use tax to their state for out of state or untaxed web purchases they made for that tax year. For example if you live in Illinois and buy something from Shapeways in theory you would add the tax owed to Illinois on the use tax form that gets filed with your tax return. In the absence of any sales tax collection by a company like Shapeways the Illinois use tax law and forms for lucky Illinois residents would still apply.

    I also recall there being some talk about companies such as Paypal eventually being required to send something like a 1099 form to users listing the monies received by their accounts. Not sure if they ever resolved issues with that. There would need to be some way of grouping payments into various taxed and non-taxed categories to make something like that feasible.
     
  12. lawrencekramer2014
    lawrencekramer2014 Well-Known Member
    Sales Tax:
    After the recent US Supreme Court decision, the responsibility for collection is shifting to the retailer.
    Nexus was overturned, all states may now force retailers with no presence in the state to collect sales tax on shipments into their state. (Technically, if they have 200 or more sales per year in a given state.)
    see:
    https://www.forbes.com/sites/tonyma...aw-on-collection-of-sales-taxes/#7320411f58df

    Under the old nexus rules Shapeways should have been collecting New York sales tax on all purchases with a New York delivery address. Now they will have to collect for many states, not a big deal because there are software packages available that enable compliance.

    On 1099:
    Here's the relevant reference:
    https://www.irs.gov/businesses/smal...reporting-payments-to-independent-contractors

    So if any shapeways shop makes more than $600 in 2018, shapeways will have to file the 1099 with the IRS and send you a copy.

    I'm glad I'm not the retailer, this is the kind of stuff I was worried about. Shapeways will have to handle it.

    By the way I once had to pay the Illinois Treasurer a $35.00 late fee for not paying $0.00 in the quarter after my online retail business closed. No sales in that quarter, properly reported, no sales tax due, but I did not pay $0.00 on time, so a late payment fine. I paid them $45.00 just to have a credit balance on file and get them off my back.
    Kafkaesque

    Best Wishes,
    Lawrence
     
    Model_Monkey likes this.
  13. Model_Monkey
    Model_Monkey Well-Known Member
    All good points, Lawrence.

    Regarding sales taxes, it should be noted, too, that Shapeways has been collecting US sales taxes for the locations depending on where the product was printed, not just the Shapeways factory in New York. This includes the locations of Shapeways' partners (3rd party printing businesses not owned by Shapeways, who do print for Shapeways).

    For example, if a customer in Washington state ordered a product from Shapeways, one might think that previously to the Supreme Court decision, no sales tax would be due since Shapeways' factory is in New York. But if Shapeways assigned the print to their 3rd party partner in Washington state, sales tax was indeed collected for that sale from that customer, by the office in New York at checkout.

    The transaction was rather seamless since the sales tax was collected immediately at checkout. The "outsourced" printing assignment to a 3rd party did not occur sometime after the sale. This indicates that printing assignments outsourced to 3rd party partners are done as part of an automated process.

    Same was true for the Shapeways partner in Orem, Utah. My Utah addressed customers paid sales tax at checkout and the Shapeways-marked packages received by them were shipped from an Orem address, not New York.

    But sales tax was not collected when I ordered prints delivered to me, likely because the products were shipped from New York, Utah or Washington. I am not in any of those locations. As of last month, anecdotal evidence from customers and personal experience indicate that Shapeways was not yet collecting sales tax for products sent to US locations in states where the product was not printed. This may have changed or will soon. We will know at checkout.

    There may be other US partners other than Utah and Washington.

    Regarding income taxes, as Lawrence pointed out, the US federal tax earnings threshold reporting "trigger" is sales in excess of $600 USD. There may be different state "triggers".

    Some time ago (years), there was either as part of the tutorials or perhaps in the forums, an official statement from Shapeways explaining that Shapeways does not send 1099s to US-based designers and reported that since designers on Shapeways are physically located all over the world, it was the responsibility of each designer to meet his or her country's tax requirement(s). I have not been able to find that statement now, but perhaps someone else here can. Perhaps, Shapeways will begin sending 1099s this year. There has yet been no official statement.

    For example, my annual shop earnings from Shapeways have always exceeded the $600 US trigger. True to their past official statement, Shapeways has never sent me a 1099 of any kind, even though Shapeways is headquartered in New York now, and I am also in the US. Come tax time, I use the invoices on the sales page of this website to tally what Shapeways paid me for the year and report that information as simple income to the IRS. The tax preparation software I use does permit me to report Shapeways payments to me as a designer as simple income, and it allows me to identify the source of that income as "Shapeways", thus meeting my federal and state tax requirement.

    The point here is that even if a US designer does not receive a 1099, there may still be a reporting requirement. The absence of a 1099 does not mean US-based designers owe no taxes. If what a designer may or may not owe in taxes is in doubt, it is recommended to consult a tax professional/attorney familiar with the requirements in your location.

    Hopefully, tax software like TurboTax will help guide us US-based lay-folk in proper reporting.

    Cheers!
     
  14. MrNibbles
    MrNibbles Well-Known Member
    The next best thing to leaving Illinois is leaving Crook County.
     
  15. lawrencekramer2014
    lawrencekramer2014 Well-Known Member
    I hope Shapeways has a smart enough legal team to quickly start the process to meet the IRS 1099 requirement before the IRS slaps them with a multi-million dollar fine. Best not to upset the IRS.