Premium Report - US Tax Thresholds

Premium Report - US Tax Thresholds

US Tax Thresholds

This report is for merchants who collect sales tax in the United States so they can see the tax thresholds on a state-by-state basis. 

This is report is vital to see any states where you may be over/under collecting and adjust your tax setup accordingly. 

This article assumes you have a basic understanding of US Sales Taxes. You may want to refer to our other article, which covers many common sales-tax-related questions. 
As a Premium Report, this is available on all Paid Plans of Report Toaster. If you aren't signed up, follow these steps here to upgrade your account. 

Establishing Nexus

In order to understand this report, it's first important to have an understanding of what constitutes a Nexus for the purposes of collecting Sales Tax. 

As our main guide here explains, Nexus can be either physical (you have a physical presence in the state, e.g. a store) or economic (you exceed a certain sales threshold for that state):

Generally speaking, what this means is that you need to be collecting sales tax if either: 
  1. You are shipping orders to a state you have a physical presence in.
    1. For example, if my business is located in Georgia and I have a retail outlet in Colorado, I will need to collect Sales tax for both of those states - regardless of how much volume I have in terms of sales. 
This former part is easy - merchants tend to know which states they operate in, and the rules are straightforward - you need to be collecting, period.
  1. You are shipping orders to a state and the total orders in the current/previous calendar year exceeds the applicable Revenue and/or Transactions threshold for that state. 
    1. For example, if I have shipped more than 200 orders to Illinois, I meet the threshold for that state.
This latter part is much harder to determine. Not only are the thresholds different for every state, but whether you do/don't need to be collecting for a particular state can actually change, year over year. 

Here is where the Tax Threshold report comes in!
Using this report, you can see what the thresholds are for each state (# of transactions/$ amount), the # of orders/revenue you have for that state, and any actions you need to take.

Note - the threshold for most states is 'Current or Previous Calendar year. We chose last 365 days as the date range to make sure this report is useful year-round.
However, if your sales vary quite a bit month-over-month, you can of course change the view to either Year to Date (current year) or Last year to change the time period under consideration

Here is what you need to be familiar with to understand the US Tax Thresholds report: 

1.) Shipping address/State or Province: The state or province for where the orders were sent.

For example, if an order was shipped to Georgia, it would be included on the line for Georgia. 

2.) Tax Threshold/Type: Whether the threshold for that state is Revenue Only, Either, or Both:
  1. If a state is Revenue Only, this means there is only a Revenue threshold for that state. 
  2. If a state is Either, then meeting either one of these requirements (Revenue or Transactions) will put your store above the threshold.  
  3. If a state is Both, then only meeting both of these requirements (Revenue and Transactions) will put your store above the threshold.
For example, Georgia is marked as Either. This means that exceeding either requirement,  Revenue ($100,000+) or Transactions (200+),  

3.) Tax Threshold/Revenue: The revenue threshold for that state. 

For example, Georgia has a Revenue Threshold of $100,000. This means that once you have revenue that exceeds this figure for orders shipped to Georgia, you will be required to collect taxes on those sales.

4.) Taxable Revenue: The amount of revenue for that state so you can compare vs the threshold.
This is normally the Net Sales, unless the state taxes shipping, in which case this is Net Sales + Shipping. 

Note - Taxable Revenue automatically excludes any Sales were the product is marked as non-taxable (Taxable = False), or any sales from Customers that are marked as exempt (Tax Exempt = true)

For example, Georgia does tax shipping. So Taxable Revenue will include both Net Sales and Shipping for that state for a total of $38,208.76. 

If a customer bought 1 non-taxable item for $50 and 1 taxable item for $100, then only the $100 sale would be included under taxable revenue.
If a tax exempt customer bought anything (regardless of whether or not the item is identified as a taxable) then their sales would not be included under taxable revenue. 

5.) Tax Threshold/Transactions: The transactions threshold for that state, if applicable.

For example, Georgia has a Transactions Threshold of 200. This means that once you have exceeded that figure for orders shipped to Georgia, you will be required to collect taxes on those sales.

6.) Orders: The number of orders you have that shipped to that state. This you can cross-compare with the transactions threshold (above) to see how close you are to exceeding the threshold.  

For example, in the screenshot above, there were 265 orders shipped to Georgia in the last year. This would be above the threshold amount, so taxes will need to be collected for that state. 

7.) Taxes: The amount you have witheld in Sales Tax for that state. 

For example, $2766.45 has been withheld in tax for the state of Georgia. 

8.) Tax Threshold/Status: The status for your sales vs the respective threshold for that state. The possible options here are:
  1. Collecting, Under Threshold. States where you are currently collecting taxes but haven't met the threshold.**
  2. Not Collecting, Over Threshold. States where you are not currently collecting taxes but you have exceeded the threshold.
  3. No Action Required. The default option, either because you are over the threshold and are collecting taxes, or because you are under the threshold but aren't witholding taxes. 
For example, we can see that for Georgia the threshold has been exceeded, but taxes are being collected - so no further action is required.  

**Note - we do not have visibility into which states you have physical nexus in, so for cases where you are collecting but still under the threshold, each individual merchant will have to determine if this tax is being collected appropriately.

Like all Report Toaster reports, these reports are fully customizable - so you can adjust the date range, add/remove columns, introduce a filter or change the sort to suit your individual needs. See our basic guides here for more info.

For other premium reports you can add to your account, check out our other article guides here

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