WooCommerce Sales Tax for the US: How to Enable Automated Calculations and Filing

Written by Marina Pape on June 26, 2018 Blog, How to sell online.

The US Supreme Court decided this week that each state can now require sales tax to be collected on internet sales. This ruling opens the door for states to do something that they haven’t been able to before: tax a lot of internet sales.

tl;dr: Enable free, automated, single nexus tax calculations with WooCommerce Tax, or for additional nexus and more complex tax scenarios, and auto-filing, try TaxJar.

While WooCommerce can’t advise you on which taxes your business needs — that’s a question for your accountant — you can configure settings in WooCommerce to either manually or automatically calculate taxes based on the requirements of the new rules.

Sales Tax for eCommerce in the US: a long-contested issue

Sales tax has long applied to brick and mortar business in the United States, but eCommerce businesses have been operating largely tax-free outside their home state.

The new ruling overturns a decision made in 1992 that said businesses were exempt from sales tax unless they had a substantial connection to the particular state they operated in. The new Supreme Court ruling opens the door for states to tax sales for businesses that do not have a presence in their state.

Right now, there’s still a great deal of uncertainty, mainly around the amount of sales that a business would need to make, before state sales taxes would apply. The South Dakota vs. Wayfair ruling said that more than $100K or 200 transactions in a state means significant presence — whether or not other states use that same amount or not we’ll see, but that number was given with this ruling.

Five sales tax questions for online sellers in the US

If you’re selling online within the United States, and wondering how to work out sales tax for your business, you’ll need to have answers to the following questions:

  1. In what states does your business have a significant presence (over $100K in sales, brick and mortar store, inventory stored in a warehouse, etc) i.e. your sales tax nexus
  2. From and to which what address(es) will your products be shipping?
  3. Do you sell any tax exempt or non-taxable items?
  4. Do you sell to any tax exempt customers such as tax exempt entities or resellers?
  5. How will you remit (file and pay) sales tax you collect?

We recommend chatting to an accountant to ensure you proceed correctly. Read more.

Setting up taxes in WooCommerce

WooCommerce has a number of options to help you set up and collect taxes as required in your legal jurisdiction.

Navigate to SettingsTax in your WooCommerce dashboard to find several options that can be set to suit your needs. Settings you choose are based on the tax jurisdiction under which your store is located:

Read more about setting up taxes in WooCommerce.

How to enable automated tax calculations in WooCommerce

For WooCommerce merchants in certain countries — including the US and Canada — it’s possible to enable automated tax calculations. This can save significant amounts of time!

Once activated, you will see a new option in the Settings > Tax screen: Automated taxes. Toggle on Enable automated taxes!

With automated taxes enabled, you won’t need to set up any tax rates manually — it will be taken care of for you! 

There are currently two options for automated taxes in WooCommerce which you’ll choose between cased on the complexity of your tax setup:

WooCommerce Tax: Automated calculations for single nexus

WooCommerce merchants with nexus in a single state can use WooCommerce Tax to enable automated taxes. It’s free, powered by WooCommerce Services, and requires Jetpack. Let the walk-through video below guide you through installation and setup:

Automate your taxes — get WooCommerce Tax

TaxJar: Complex or cross-state calculations plus auto-filing

Perhaps with the new ruling, you are facing a scenario where your business now has a presence in more than one physical location, or in multiple states. For these cases, try TaxJar’s standalone plugin, which is geared towards automating more complex tax calculations. It’s free for 30 days, then pricing starts at $17 per month for 1,000 calculations.

How TaxJar can help

Once enabled, TaxJar will import your sales information into your TaxJar dashboard each night. The service will then break down your sales data into separate state reports for everywhere that you sell (and even further in their state reports). In just a few clicks, you’ll be able to see your sales and transaction data by state and easily keep track of where you stand as new economic nexus laws are passed in the coming months.

However you calculate, automate the filing of returns with AutoFile

However you choose to calculate taxes, you’ll need to remit that amount to the state(s) according to your specific filing schedule.

Every state is different and they will assign you a filing schedule individually when you register for a sales tax permit. For example, some states may require you to file your return monthly, quarterly, semi-annually or annually (usually depending on your sales volume).

If you’re spending hours completing your sales tax forms today, TaxJar can automate that process: AutoFile prepares and files your sales tax returns with the data from you WooCommerce store allowing you to automate the filing of your returns — new pricing from $9.26 per filing. You never have to worry about sales tax due-dates again!

When to choose TaxJar’s standalone plugin:

  • Your business has significant presence in more than one state
  • You’d like to view exactly how much your business sold, sales tax collected, and the number of transactions you’ve made across multiple states
  • You’re spending multiple hours or more filing sales tax returns
  • For peace of mind. TaxJar will keep up with the new economic nexus laws as each state makes changes, and immediately update their customers as and when new sales tax laws take effect.

Get TaxJar

Stay tuned as information is released and things become clearer

The Supreme Court ruling is brand new, and there will be an adjustment period while the dust settles and states determine levels how to apply the new law.

We’re keeping an eye on this and will share more information as things become clearer. In the meantime, be sure to keep an eye on TaxJar’s blog — the most visited sales tax blog on the internet!

23 Responses

  1. city service hub
    June 26, 2018 at 7:01 pm #

    thanks for nice post article ,it will help us to enhance knowledge as well as skills . thank you and keep it up

  2. Jim
    June 26, 2018 at 8:29 pm #

    Great write-up, thanks!

    There is one thing that remains very unclear about the ruling, and any potential pending legislation. That is, who gets the taxes collected? Will all taxes collected go to the state where the online business resides? Or will businesses need to start submitting sales tax to individual nexus states? If the former, I fear the latter may follow shortly after implementation, once the “customer” states start demanding their fair share of collected taxes…

    Regardless, it is a can of worms we will all have to open. Thank you for providing the right tools!

    • TaxJar
      June 26, 2018 at 10:52 pm #

      Hi Jim,
      Thanks for the comments. You’re right. There’s certainly a lot of things that are confusing related to sales tax after this recent ruling! But as for your question on ‘who gets the taxes’, here’s how it plays out right now (and this is not changed by this recent ruling)…

      When determining sales tax you first need to know if you’re shipping it INSIDE your home state, our OUTSIDE of your home state. If you’re shipping an item you sold within your home state (ie: intra-state sourcing), the sales tax collected depends on if a state is considered an Origin-based state or Destination-based state. More on that here: https://blog.taxjar.com/charging-sales-tax-rates/

      If you’re shipping something OUTSIDE of your home state (ie: inter-state sourcing), the law requires you to always use destination-based calculations. Meaning, that you always charge the rate of the location of where your customer is located IF you have nexus there (nexus = having a physical presence, or now an economic presence as well).

      You may be thinking, “Why would I need to pay sales tax to this other state when I don’t even have a business there? etc”. Well, despite the fact that you don’t operate a brick and mortar shop there, you are still using a portion of the state’s resources to get your widgets shipped over to your customer (ie: traveled across state roads, item didn’t get stolen by wild ninjas on the way, etc :)) So if you meet that state’s requirements for nexus (which this ruling now re-defines), then it is now fair for that state to collect their share of the sales tax.

      But remember, if you don’t have nexus in a state where you’re shipping to, then you don’t need to collect any sales tax on that transaction.

      So while there’s still a lot of political debate about who is getting their ‘fair share’ of sales tax on a purchase, right now that’s what the law states.

      Hope that helps break it down a bit 🙂

  3. Angela
    June 26, 2018 at 8:48 pm #

    Why isn’t AvaTax listed here? I have been using them with my Woocommerce account for the better part of two years.

    • kristinaplauche
      June 26, 2018 at 9:50 pm #

      Glad to hear that! Thanks for bringing that up as another option for WooCommerce users.

  4. David Thompson
    June 26, 2018 at 9:14 pm #

    Just because it is a ruling by SCOTUS does not make it law, that is for Congress or states, counties, cities to enact and that will take years. Some estimates are there could be 1200 tax zones/rules does this include that or just the 50 states?

    • kristinaplauche
      June 26, 2018 at 10:02 pm #

      That is true that there are still a lot of details to iron out and a SCOTUS ruling doesn’t make it law. I’m sure that there will be many variations of rules yet to come. That’s why we’re trying to help everyone stay ahead of this and be prepared.
      The tax services help you pay sales tax in every place that you have tax liability. Each state is a little different. They help you navigate that. I hope that answers your question.

    • TaxJar
      June 26, 2018 at 10:56 pm #

      Hi David,
      You’re right, there’s still some time to come before the states enact new laws as a result of this ruling, but it may be sooner than ‘years’ for some as many states have had economic nexus laws ready to go waiting for this decision to be made. More on that here: https://blog.taxjar.com/economic-nexus-laws/

      We’ll have to wait and see what happens in the coming months, but right now there are 45 states that collect sales tax and likely will be plenty of different sales tax nexus laws enacted in each of those states.

      As was mentioned above, we’re here and happy to help you navigate these changes as they are released. I’d recommend subscribing to our Sales Tax Blog if you’d like to join the conversation and we’ll keep you updated with as much as we know!

    • Jeffery W. ingram
      June 27, 2018 at 12:07 am #

      David, I have been watching my wife who is a CPA look at it for her clients. There are over 12,000 sales tax zones. Some states are very complicated.

  5. Tony
    June 26, 2018 at 9:18 pm #

    Will be working on setting up a Woo store soon, but the site will only sell a few t-shirts and hats for a non-profit. I had looked into TaxJar, but the cost per month is not worth the low sales volume and profit of the site. I was excited to see the free WooCommerce Tax, but then disappointed to see that it needs Jetpack, which I don’t like at all.

    Are there any better options or recomendations for collecting tax on Woo sites than these two examples? Something that is cheaper than TaxJar and doesn’t requite Jetpack?

    • kristinaplauche
      June 26, 2018 at 10:43 pm #

      I can’t really recommend a less expensive option better than Jetpack, because I think Jetpack is amazing. 😉 I don’t know of any other services that provide as much functionality for the “price” of free.
      But I understand your hesitation. When I was a merchant, I felt the same way. It took me a couple of years before I finally installed it and connected it. Then I realized that I had been missing out!

      As far as something else without Jetpack that has no fees, we don’t have any other recommendations that we know will for sure work well with WooCommerce. Maybe t-shirt sales will skyrocket by the time this is needed and TaxJar’s fees will be a perfect fit so your non-profit can enjoy the convenience and focus on even more sales to help you cause. 🤞

    • Heather
      June 26, 2018 at 11:53 pm #

      Tony – I agree about Jetpack. I recently removed it from my website because it slows the site down and after doing some research and talking to others many suggested ditching Jetpack. I love this idea of using WooCommerce Tax but I’m really disappointed that it has to be used with Jetpack.

    • Marlys
      July 11, 2018 at 8:36 pm #

      I have to agree with the others on this thread. Having to install Jetpack to use an extension is a huge negative for me. It’s well-known among WordPress users that Jetpack is a space hog and bogs down sites with requests, slowing down the site experience for admin as well as visitors – I’m honestly very surprised (and puzzled) by this build choice. I’ve tried the setup, but encountered the known speed issues, so will uninstall the tax extension and Jetpack for now until a better solution comes along.

  6. rucient
    June 26, 2018 at 11:31 pm #

    Any ideas how a multi vendor site will need to deal with this? The site itself is not selling the products. Will/do the companies who choose to sell using the multi vendor marketplace be considered nexus’s? Site owner or shop owner will be responsible for keeping track of the taxes?

  7. Anabell
    June 27, 2018 at 4:52 am #

    WooCommerce Sales Tax, It’s not likely at the moment as demand for it is small. We are opening up the marketplace to more third-party developers and may see this come up then. What I think is much more likely is an official integration with major exchanges. It’s not in the works but I’d love to see it happen.

  8. Sam Hyde
    June 27, 2018 at 7:57 pm #

    Requires Jetpack? We ditched Jetpack within 2 months of buying it. C’mon

  9. Mike
    June 29, 2018 at 1:25 am #

    I’ll be launching my membership site soon and wonder if all this tax ruels apply to a membership site as well since it does not involve any shipping of tangible goods at all. We may also sell ebooks but that doesn’t involve shipping either.

    If the rules apply, I assume the “more than $100K or 200 transactions” is not retroavtive, i.e. if we reach this threshold on August 11, we don’t have to pay sales tax for all sales before this date, correct? I guess I’m a bit paranoid here 🙂

  10. Nandani Kumari
    June 30, 2018 at 9:45 am #

    Ma’am your article WooCommerce Sales Tax for the US: How to Enable Automated Calculations and Filing is very informative. thank-You for sharing it With Us.

  11. Don
    July 2, 2018 at 11:00 pm #

    NOTE: I currently use WooCoomerce. I’m about to launch a site that services nonprofits (Churches) 501(c)3 as a sole proprietor (no employees). Here in CT according to the “Dept Revenue Services” sales tax is 1% on these web services. Each transaction will be subscriptions at $14.95 or $24.95 and I will supply only two physical products for $29.95 both ordered from the publisher. At this point the tax per most transactions will be $.15 or $.24.

    According to the DRS when they sign the contract I would need to request/demand their tax exempt entity forms, keep them on file, etc. in order for them to avoid sales tax. Actually, there will be no contracts, invoices, etc. They will pay one time on PayPal.

    At this point for so little I’ll put it in the price and pay it out of my own pocket from the sale. Otherwise all this is waaay too much hassle for $.15.

    CT is confusing enough but I have no idea how to handle 49 other states, whether they charge for web services at all, how to find out, how much, etc. After seeing this I’m a bit intimidated, overwhelmed and discouraged…not sure at this point if its worth the hassle of the bookkeeping, legal complications and more along with the web of city and state regulations, submissions, et al.

    Does anyone know a reasonable (as in not hours and hours of research) means to find these answers; eg. states and web services, how much tax, how to calculate tax, etc. Did I mentioned overwhelmed?

    Can’t thank you enough for your help.

  12. Don
    July 3, 2018 at 12:58 am #

    Actually, after poking around it looks like I and those like me are pretty much off the hook. According to https://blog.taxjar.com/economic-nexus-laws/ most states required over $100,000 to trigger sales/use tax collection. (That would be a good problem to have!).

    A few states (Washington, etc) trigger is $10,000, still not a deal killer. So, I THINK I’ll be okay as far as having to collect sales tax for 50 states.

    I still welcome any additional insights or caveats.

    • Robin
      July 13, 2018 at 2:47 pm #

      I am assuming that the trigger is yearly? So if in 2019 you hit the trigger, you pay. Is that trigger now set and you pay every year forward?

  13. roy smith
    July 10, 2018 at 9:18 am #

    Thanks For Sharing

  14. Suman Gupta
    July 13, 2018 at 8:53 am #

    Glad to hear that! Thanks for bringing that up as another option for WooCommerce users.

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