Ecommerce sales tax policies can be confusing, but in this post we’ll explain how US state sales taxes and international VAT/GST/customs duties are charged on our online stores:
US State Sales Taxes
Prior to 2018, sales tax collection at Walnut Studiolo was pretty straightforward. Before 2018, it was generally thought that states could only enforce a tax collection obligation on businesses that had a physical presence in the state, such as a brick-and-mortar location or remote employees. Since we have our only physical presence in Oregon, one of three states that has no sales tax (along with Montana and New Hampshire), we didn’t need to collect any sales taxes at all.
Then, on June 21, 2018, the Supreme Court of the United States ruled in favor of the State in South Dakota v. Wayfair, Inc. This ruling allowed South Dakota and other States to begin taxing remote sales via “economic nexus” laws. Economic nexus laws now also include a sales tax obligation based on a certain level of economic activity within the state, including sales revenue, transaction volume, or a combination of both. [Source: Avalara]
Since that ruling, more than 40 states enacted economic nexus laws of their own. As a (very) small business, the idea of suddenly having to register, collect, and remit up to 50 different state sales taxes, each with their own policies, thresholds, registrations, and laws, was worrying, but there was a reasonable economic threshold set for each state. Although the thresholds vary, the average generally require businesses to collect taxes on their behalf if they sell over $100,000 and/or 200 orders per state per year. Because of this, the treatment of individual mom-and-pop small businesses like ours are treated differently from ecommerce marketplaces.
The economic nexus laws have been nicknamed “Amazon laws” because the primary goal for these states was to require ecommerce goliath Amazon to collect sales taxes. Because of this, the laws specify that for a small seller using a marketplace, the marketplace is responsible for collecting and remitting the taxes.
We sell our products on “marketplaces” other than our websites, such as Etsy and Houzz. These marketplaces process the payments, charge sales tax, and remit them on their own, including on our products.
Our Oregon Website
The rest of our sales happen off-marketplace on our own website, walnutstudiolo.com. Because the sales on our website represent only a portion of our sales, and the rest of the sales have had sales tax already collected by the marketplace, the annual sales on our website (both in terms of revenue and number of orders) does not reach the economic threshold of any state.
Thus, because we are in Oregon which has no sales tax, and because we do not meet the “economic nexus” for any other state, we do not currently collect US State sales taxes on our website.
We regularly monitor changes in state laws and economic nexus thresholds and this may always be subject to change.
International VAT, GST, and Duties
Unlike the US, many countries have a national-level or federation-level sales tax, usually called the VAT (Value Added Tax) or the GST (Goods & Services Tax). In addition, many countries charge additional duties and tariffs on particular products at different rates.
However, similar to US States, some countries have passed laws requiring marketplaces with an economic threshold to collect VAT / GST. As of this writing, post-Brexit UK laws are still being worked out.
For Walnut Studiolo, the only marketplace on which we sell internationally is Etsy. Etsy is currently collecting VAT / GST in Australia, New Zealand, UK, and Norway. Policies are always changing: this webpage collates Etsy’s international tax collection policies.
Thus, customers who would like to pre-pay VAT/GST are recommended to purchase on our Etsy store. Note that Etsy may not be collecting all customs duties and import taxes, just VAT / GST.
With shipping to over 200 countries and several categories of products, and the majority of its sales in the US, Walnut Studiolo as a small business running its own website does not have the expertise to collect international taxes in advance.
In practice, that means that when a customer’s package arrives at their local post office, the country may charge additional taxes that must be paid prior to delivery. This both slows down delivery and can be an unwelcome surprise. On our website, we provide a link to a duty calculator and HTS tariff codes for customers to estimate the cost in advance.
Our international sales policies are kept up-to-date on our website: https://walnutstudiolo.com/pages/international-shipping
About Walnut Studiolo
Walnut Studiolo crafts original modern designs by hand in our Oregon workshop using only natural materials. We are a family-run company located on the North Oregon Coast. Learn more about us on our website: https://walnutstudiolo.com