about 1 month ago

Shopify Calculating California Sales Tax Incorrectly?

It looks to me as though Shopify is incorrectly calculating taxes when "Calculate taxes automatically is clicked."

TaxJar says: "If you only have one location in California, then you’ll charge two sales tax rates. You’ll charge your district rate to buyers located in your district, and the California state rate (7.25% in 2018) to buyers outside your district." https://www.taxjar.com/states/california-sales-tax-online/#how-to-collect-sales-tax-in-california

The California BOA website says the same thing (https://www.boe.ca.gov/sutax/faqtaxrate.htm#5): you only have to collect district taxes if you make a sale to someone else in the same district in California. When you sell to other districts in California, you only need to collect district sales tax if you are "engaged in business" in that district. The website defines engaged in business, but the relevant part here is if you: "Ship or deliver the property into the district using your own vehicle." 

Here is what the website (https://www.boe.ca.gov/sutax/faqtaxrate.htm#5) says:

If I am located in a district, am I subject to my district's tax if I make a sale to a person located outside the district?

You are generally not required to pay for your district's tax if the customer does not take possession of the property in your district.

However, if your customer is located in another district, you are generally required to pay that district's use tax if:

  • You are “engaged in business” in that district and you ship or deliver the property, as agreed to in the contract of sale, into the district (or otherwise participate in the district in the making of the sale).

Shopify appears to be charging district taxes to those in counties in which I am not engaged in business.

Am I missing something?