Whether you are a business or a non-profit organization, you need to understand the tax requirements in your area if you are selling merchandise through your Wild Apricot online store. Once you determine which jurisdictions require you to collect tax, you can configure your tax settings in Wild Apricot appropriately.
This help topic is not intended to provide legal advice, but simply represents our understanding of the latest tax requirements for online transactions. To ensure that your organization complies with tax requirements in your jurisdiction, you should consult a lawyer.
In this article, we look at the rules regarding the collection of sales tax for online sales in the United States and Canada.
In June of 2018, the U.S. Supreme Court issued a ruling that changed the rules regarding the collection of sales tax for online businesses in the US.
Before that ruling, US states were only allowed to collect sales taxes from businesses that had a physical connection (aka nexus) to that state. The connection was understood to be a physical presence in the state such as retail outlets, employees, or property. So basically, small businesses only had to collect sales tax for online sales to individuals who lived in their home state. Larger online retailers who had offices or warehouses in multiple states had to collect sales tax from individuals in each of those states.
Then, in the case of South Dakota v. Wayfair, the Supreme Court ruled that the state of South Dakota was within its rights to require out-of-state retailers that made at least 200 online sales or sales totaling at least $100,000 in the state to collect and remit sales tax. The state successfully argued that sales in these volumes represented a connection (or nexus) between the retailer and the state.
Since that ruling was issued, the majority of US states now require – or are in the processing of requiring – that online retailers collect sales tax when selling to residents of their states, even if the retailer has no physical presence in the state. Most states have set a threshold of sales, beyond which sales tax must be charged.
For the latest information on which states require out-of-state retailers to collect sales tax on online sales, click here.
The tax requirements for Canadian-based organizations depend on where your customers reside.
Selling to US residents
Canadian organizations selling online to US residents will have to comply with the tax sales of the states where their customers reside. Depending on the state, you may have to collect sales tax for all online sales, or only for sales in excess of a volume threshold. For the latest information on which states require out-of-state retailers to collect sales tax on online sales, click here.
Selling to Canadian residents
Online sales to Canadian residents are taxed using the same rules that apply to physical stores.
If you are selling merchandise in your own province, the tax rules for your own province or territory apply. For example, if your organization operates in Ontario and you sell an item online to someone in Ontario, you would charge 13% HST on the sale.
If you are selling merchandise to someone in another province, you charge the GST/HST rate based on where the goods are being shipped to. So, for instance, if your organization operates in Ontario and you sell an item online to someone in Nova Scotia, you would charge Nova Scotia’s 15% HST on the sale.
However, if you are selling items to someone in Alberta, the Northwest Territories, Nunavut or Yukon, where there is no provincial sales tax, you would charge only the GST (5%) on the sale.
For more details on the sales tax requirements for different provinces, click here.
Applying taxes to online store purchases
In the initial implementation of taxation support for Wild Apricot's online store, you can only choose whether to apply the default tax settings to online store purchases. You cannot override the default tax settings based on the purchaser's location.
For more information on setting up taxes for your Wild Apricot site, click here.