Join Patrick Rauland for an in-depth discussion in this video Understanding taxes, part of WordPress: Ecommerce.
- Taxes aren't simple. Some countries have a federal tax you pay, some states have a tax on top of that, some counties have a tax on top of that, and some cities have a tax on top of that. That's a lot of taxes. Let me start by saying I am not a tax expert and you should get the necessary information from a tax professional. What I can do is give you an idea of how taxes work in general so you can expect what taxes you'll have to set up. The general rule is that if you have Nexus in a place, you have to pay those taxes.
Nexus means having physical presence in a state, like a warehouse or storefront. So if I have a store in Colorado and a warehouse in Utah I have to collect both Colorado and Utah taxes. Now, that doesn't mean that with every purchase I have to collect both Colorado and Utah taxes. You usually only collect one set of taxes. So if my customer is in Colorado, I'll pay Colorado taxes. If my customer is in Utah, I'll collect Utah taxes. If the customer is in some other state, I don't collect any state taxes.
At a very high level, that's how e-commerce companies collect taxes on goods shipped and sold in the U.S. There are two different ways to display taxes. In Europe, it's fairly common to display tax-inclusive prices. That means, if the product costs ten dollars, part of the ten dollars go towards the taxes. The customer is paying the taxes, but it's not an additional line item on a receipt. It's built into the price. If you're in Europe, make sure your e-commerce platform can show tax-inclusive prices.
If you're in the U.S., you want to make sure your e-commerce platform can show tax-exclusive prices. That means, if your item costs ten dollars, you're gonna have to add tax on top of that. Almost all e-commerce platforms will handle this. If you're just getting started and you aren't taking that many orders, you can probably get by setting up taxes manually. Most e-commerce platforms let you enter tax rates. If your store starts growing and you want to make sure tax rates update automatically, there are services that do this for you. Ithemes exchange integrates with TaxCloud, which is a service that gets your tax rates for you.
WooCommerce integrates with TaxJar, which gets your tax rates for you and it does a few extra things, like preparing your sales tax. Some e-commerce platforms don't ask for billing details. They might only ask for an email address. These look really sleek, but they might not be accurate for tax purposes. If you aren't asking the user for a country, state, zip code, and city, how do you know what taxes to charge them? If you plan on using a platform that has one of these sleek checkouts, make sure to check with a tax professional ahead of time. It's worth noting that certain products may be tax exempt.
Some states in the U.S. make certain types of food, clothing, medicine, or medical equipment tax exempt. You'll have to consult with your tax professional to determine if any of your products meet that criteria. Before you launch your site, you should reach out to a tax professional.
To start, you need to understand the market for your product or service so you can build your website around it. So Patrick Rauland kicks off with some key questions that will help you define your audience and organize your products. He'll then help you set up a payment gateway with PayPal or Stripe, ship orders, collect taxes, and secure sensitive data. And if you weren't convinced already, Patrick reviews the benefits of WordPress ecommerce tools as well as a selection of third-party tools that integrate beautifully with WordPress. Plus, get bonus tips on marketing your new website: attracting and retaining customers and increasing the value of the average order.
- Defining your audience
- Organizing your products
- Marketing your WordPress site
- Increasing average order value
- Getting paid
- Checking out with PayPal or Stripe
- Managing and shipping orders
- Collecting tax
- Protecting sensitive data
- Using WordPress or third-party platforms for ecommerce