American Tax Decision

In case you missed it yesterday, there was an unfortunate taxing decision made yesterday that will end up effecting every American e-commerce site. The Supreme Court of the United States ruled that states can collect sales taxes on orders placed on the internet. This is a huge blow to small businesses in the US that operate online.

The crux of the decision that was made, is that a business no longer needs a nexus in a state to be liable for collecting that state’s sales tax. If you want to read more about the decision and some of its implications, this is a great article.

I can imagine that our European readers are thinking “Whats the big deal on collecting taxes”. America does not use a simple unified system like the EU does. In the US there are over 10,000 different sales tax jurisdictions with different sales tax rates and laws. This is a huge amount of compliance data for shops to handle. Some of the tax laws are just plain quirky as well. A good example is in New York City, the first $110 of clothing purchases are tax free, after the $110 mark the rest is taxed. Or some states tax only some goods, while other goods are tax free. These are only a few of the weird tax laws that are about to be more well know.

What can we do?

Unfortunately a tax system this complicated cannot be added to thirty bees. It would take more than a complete overhaul of the software for us to add these taxing capabilities in. Then we would have to maintain a database consisting of all the US addresses, which each one linked to the tax zones. Next we would have to keep that updated, and to be honest I do not know how we would find out about every municipalities tax changes. So, that is a non starter.

What we have done is talked to Tomer at Presto-Changeo, they offer a module that can solve this issue for US shops that is compatible with thirty bees. It is based off of a service called TaxCloud. The service is free for most users, depending on what state you are located in, and very low cost in other states. Currently this is the only option on the market we are aware of that can handle this problem. As of right now, we are not sure which way states are going to head with the taxation, but this is something merchants need to be prepared for.