Sales Tax
Sales tax is applied to goods and services at the time of the sale. It is governed at the state level. Not all states have sales tax. States have their own sales tax rates and make their own sales tax laws and rules. Sales tax is calculated as a percentage of the sale price of an item that is then added onto the total price of the item and paid by a fan at checkout. When required by a state or locality, Rhythmic Rebellion will collect the sales tax and submit it to the appropriate authority. We use a company named TaxJar to assist us with this process.
There are origin-based US sales tax and destination-based US sales tax. To calculate sales tax correctly, it is required to know the buyer's location (where an order shipped to) and the seller's location (where an order is shipped from). That's why it's important to create a Transaction Register account inside the system and fill in the Tax Info in order to start selling goods on Rhythmic Rebellion.
In origin-based states, sales tax should be collected based on where the seller is located.
Here is the list of these kinds of states:
- Arizona
- California. This state is different. It’s a modified origin state where state, county and city taxes are based on the origin, but district taxes are based on the destination (the buyer).
- Illinois
- Mississippi
- Missouri
- Ohio
- Pennsylvania
- Tennessee
- Texas
- Utah
- Virginia
All other states are destination-based and sales tax is collected based on the buyer’s location.
Four states are sales tax free: New Hampshire, Oregon, Montana, and Delaware.
Why One Order Has Sales Tax And Another One Does Not
Rhythmic Rebellion is required by law to charge applicable sale taxes on your orders. RR charges taxes only where required to do so by the tax authorities of your jurisdiction.
To start collecting sales tax, it is required to have an economic nexus in the particular state. A nexus is a specific connection between a taxing jurisdiction - like a state and your business. There are different rules and definitions to establish this relationship. Mostly, they are based on the specific metrics; like sales revenue per year or number of the sales transactions within the previous or current year. They are called the threshold. So, if you do not see sales tax charged on one order but do see it in the another, it means that sales in that state have not met the threshold.
Rhythmic Rebellion uses a third-party, cloud-based accounting tool that automates the entire process of tracking and calculating taxes. So, as an artist you don't need to do anything. Just relax and sell, sell, sell 🙂.
See the amount of charged sales tax in the Reports menu.