One of the biggest things I feared would hold up my journey was understanding taxes. Turns out, it's not too bad for the clothing industry in New York because clothing under $110 is exempt from the state tax and so residents of New York will only have to pay their county tax.
So essentially in New York, the county in which the package is shipped to will have a jurisdiction code which indicates what tax to apply to the shipment. So tax rates are determined by jurisdiction...I'll come back to this in a minute.
And for anyone who is learning, you collect tax in states where you have a nexus. It could be either a physical nexus (your business has a physical presence in that state), a certain number of sales to the state or a dollar amount of sales like $100,000 (each state has different criteria for their nexus).
I started out on Squarespace, and I built my entire website there, bought my domain, uploaded my products, etc.,. I saw that they collected taxes by zip code which I thought nothing of; and annoyingly, I had to input each zip code and the tax rate that applied, but thought that was just part of the nitty gritty of the website. I did a few to start off, and the day before the launch, I decided to sit down and input all the zip codes and their corresponding tax rate. It wasn't long into this process that I realized that zip code ranges overlap in some counties which had different tax rates!!
So I get on the phone with NYS Department of Taxation and ask what am I doing wrong?? After literal hours of phone calls and research at my dining room table, I discovered that the tax rates are determined by jurisdiction and not zip code. I email Squarespace frantically telling them this major issue with their tax collection, and to my extreme disappointment, was met with absolutely no solution.
So with less than 24 hours until my first official launch, I had to transfer everything offer to Shopify. I WAS STRESSED.
Luckily once I input my NY tax ID, Shopify handled charging customers the correct tax rate based on their jurisdiction. AND it charged state tax on the shipping costs which actually saved me from missing that since shipping is not clothing and not state tax exempt.
I couldn't believe this major tax collection issue!! But I am so glad Shopify was able to transfer my domain in time for my originally planned launch.
So if you're thinking of starting a business, definitely make sure to look into the tax collection method on your preferred website platform.
If you made this far thanks for reading! See you at the next post!