If you are selling products on your Pro store, you may be required to pay sales tax. How are sales taxes calculated when using print-on-demand services from Printful? What is the sales tax rate that organizations pay? How can you show that your organization is tax-exempt?
Sales tax rates are different in each state, and within each state, they may also vary by county, city, and district. Printful applies sales tax rates to your constituents' orders, based on their shipping zip code.
The general formula for calculating sales tax is:
((Printful Price + Printful Shipping) * Tax Rate) = Sales Tax
Some states don't include shipping in their sales tax calculation.
The best thing you can do for your organization is to consult a tax advisor to determine if your nonprofit is required to pay sales tax on items sold. Experts can help guide you through this process and take care of the tedious items for you. We are not experts and provide this information for reference only.
Printful Sales Tax
If you use Printful, your organization will have to consider three parties: you, the customer, and Printful/the drop shipping company. Why? Because each of you could be in different states and have different tax rules.
What is sales tax nexus?
Nexus is the term used when a retailer has a presence in a particular state. A company’s presence can be difficult to determine in eCommerce, but here are a few common ways that you can have nexus:
- If your company has a physical location (even if it’s your kitchen bench)
- States you have employees or salespeople in
- States you store inventory in (e.g. If you are using Printful Warehousing and Fulfillment Services)
- States where you make enough sales, in dollars or transactions
Sales tax is collected when a customer makes a purchase in a state where you have nexus. For example, If you have nexus in California and a customer from California makes a purchase, that customer gets charged sales tax.
How to handle your drop shipping sales taxes
To sum up, here are the key points all online retailers should remember when it comes to taxes in the US:
- Your sales tax obligations as an online retailer vary from state to state.
- You need a resale certificate when buying from a drop shipper like Printful, otherwise, the dropshipping company will have to collect sales tax.
- Mark down important sales tax dates to file your tax returns on time.
Showing Sales Tax Exemption Status
Nonprofit sales tax-exempt organizations can submit either the state's tax exemption certificate, which would exempt your organization from paying sales tax on orders going to a specific state, OR the federal sales tax exemption determination letter issued by the IRS to email@example.com. Once approved, Printful will apply a sales tax exemption on all orders going to an address in the US. Organizations may also submit a resale certificate for a specific state exemption.
Note that in order for Printufl to exempt a non-profit organization, the Printful account's legal information needs to exactly match the organization's legal information.
To learn more about Printful drop shipping sales tax visit their Beginner's Guide to Sales Tax.