What Ecommerce sales-tax rate do I charge buyers if I have a retail store in Maui, but drop-ship from Oregon?
Shanook asked:
I am starting an ecommerce store, and I own a physical retail store associated with it in Maui, but the ecommerce goods will be warehoused drop-shipped from Oregon. What sales tax rate do I charge to buyers, and does it differ based on what state the buyer is located in? Hawaii sales tax is 4.166% and Oregon does not have sales tax.
I am starting an ecommerce store, and I own a physical retail store associated with it in Maui, but the ecommerce goods will be warehoused drop-shipped from Oregon. What sales tax rate do I charge to buyers, and does it differ based on what state the buyer is located in? Hawaii sales tax is 4.166% and Oregon does not have sales tax.
If the purchaser is from Hawaii, use the Hawaii rate since you have a physical location there. Orders from other states can go under Oregon (0).
You’re in a bit of a squeeze here. Oregon doesn’t have a sales tax so there’s no issue with goods shipped to OR.
Hawaii doesn’t have one but DOES have a Gross Receipts Tax that you will pay on your TOTAL RECEIPTS regardless of where the goods are shipped to or from. Your best bet would be to simply pad your prices by the amount of the GRT since you’ll pay it regardless of where the buyer is located. Although it’s common to state the GRT separately on receipts in HI, it’s not a requirement and you don’t collect it and render it in the manner that you would a traditional sales tax.
Typically, if you have your business setup/registered in a particular state, in your case, Hawaii, you have physical presence there, and you are liable for collecting sales tax when you sell to people in Hawaii.
A 1992 Supreme Court decision stated that mail-order (also applies to internet) merchants do not need to collect sales taxes for sales into states where they do not have physical presence.
However, if you are using a drop ship warehouse in nother state, let’s call it state B, it gets a little bit complicated when the customer/end-user is also in state B. Usually if the warehouse is on top of thing, they will charge you the state sales tax on each order shipped to state B either by adding it on, or building it into their prices to you. But in your case it would be 0% anyway, since it’s Oregon we’re talking about!
Bottom line, you should not have to collect any sales tax when selling to any other state other than your state, which is Hawaii, where you have physical presence. And you should expect the warehouse in state B to figure in (or charge you extra for) the sales tax for State B on only the the orders that are actually shipped there (in your case, still 0%!). You are not physically there, and so you should not be expected to deal with that state.
This is from my experience after extensive research and from my tax adviser. You might want to check with a knowledgeable tax adviser who’s familiar with ecommerce if you are still not clear. Hope that helped!
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