Understand Origin and Destination-based Sales Tax
When it comes time to apply sales tax, your business must decide between origin-based tax or destination-based tax. Different rules apply depending on your business’s location. Understanding these two different methods will ensure you are compliant with all laws and regulations.
Origin-based Sales Tax
Origin-based sales taxes are applied depending on the origin of the provider. In this case, the provider is your business. Therefore, the tax rate applied to the sale is the local tax rate where your business is located. All relevant levels of sales tax must be accounted for and applied together, including state, county, city, and district.
Destination-based Sales Tax
Destination-based sales taxes are determined by the destination of the product or service. The customer is the destination for the product or service, so the tax rate applied to the sale must be the local tax rate where the buyer is located or where the product is headed. For physical products, the tax rate is applied to the ship-to location of the product.
Different Business Rules
Which method of tax you use will depend on where your business is located. In-state businesses, or those within the same state as the customer, must use the destination-based sales tax method. Out-of-state businesses, or those outside of the same state as the customer, must apply the origin-based sales tax method.
Conclusion
Make sure to carefully assess which sales tax method you should be using for your business. Understanding the difference between origin-based and destination-based sales taxes and the laws and regulations associated with each is necessary to be fully compliant.
Tax Options
Option 1: VinesOS Automated Tax
The built-in tax rates for wine sales on VinesOS utilize ShipCompliant default tax rates and are updated every month, including tax information based on the zip codes of your shipping destinations. Although these tax rates are helpful for self-fulfillment in shipping, it's important to note that they should not be considered a substitute for legal or accounting advice.
The Automated Tax will:
Charge zip code level taxes on shipped orders.
Optionally charge additional tax on the cost of shipping, as well as the product cost. You will need to provide us with a list of what states you need to charge shipping tax on.
Disclaimer: The tax tables include the maximum local sales tax rate down to the ZIP code. They publish tables based on their latest tax research, but downloaded tables become out of date as soon as state and local tax authorities make changes to tax laws and rules. Important information about using rates based on ZIP codes: ZIP codes are a tool for the postal service, not tax authorities. There are often multiple sales tax rates in each ZIP code, county, and city. In any given year, the USPS makes numerous boundary changes to ZIP code areas.
Option 2: VinesOS State-Level Tax
You can choose to collect taxes only based on the State tax level, at one flat rate. This can be set per product type.
Option 3: ShipCompliant Full Account
Sovos ShipCompliant offers full accounts that provide not only the tax rates but also real-time DtC compliance checks against 10,000+ state rules and regulations in real-time or at the time of shipping.
Benefits include:
Compliance management for licenses and state-level changes.
Zip code level tax determination.
Direct integrations with fulfillment houses.
Analytics reporting.
To learn more and request an estimate, use the button below.
Tax Configurations
Step 1: Set up Tax rates for POS sales
Configure tax to be charged on all POS Orders for on-site sales. POS sales that are to ship will use the taxes set in Step 2.
Navigate to the Location Manager (Dashboard > Inventory > "Locations" button on top right)
Choose your Location
Set taxes for each location on the Locations tab 'Tax Rate'.
Step 2: Set up Taxes for Ship-to orders
Option A: Set up Ship taxes using Automated Tax Rates
Set up automated destination tax look-up for orders that are shipped. This includes club, e-commerce, or POS orders being shipped.
Ask your account manager to set your taxes to use ShipCompliant for ship-to orders.
If needed, let us know what states you want to charge tax on the shipping cost in addition to the product cost.
Option B: Set up Ship taxes using State Tax levels
To charge only a single flat state tax on all orders that are being shipped to that state:
Go to: Dashboard > Settings and then to each Type of product listed. NOTE: If you skip a category, tax will not be charged on those items. You do not need to set tax rates Bundles - tax on bundles will be added based on the items in the bundle.
Wine: First, select the states you can ship to and Save. States must be selected and saved first. Then go back in. Scroll down to State Tax.
All States tax: this will charge a flat rate tax to any state you ship to.
OR
Select State from the dropdown menu, and set the tax rate for each state. Click Add Row to keep adding for each state.
Option C: Set up Ship taxes using Ship Compliant
Ask your account manager to enable Ship Compliant Full Account Integration.
Go to Settings > General Settings
In the Search field start to enter "ShipComp" and the relevant fields will appear.
Enter your ShipCompliant username and password.
Save
Go to Dashboard > Settings
Select Wine
Scroll down to the ShipCompliant section towards the bottom
Toggle it on
Select the appropriate product type on Ship Compliant
Repeat this for every type of product.
If you don't set this uniquely for each product type on VinesOS, tax will not be charged, and compliance will not be checked.
Save
Test your tax settings
Test, test, test.
Go to the POS and test adding different products for each type, for ship, and for pickup, and verify before you launch that taxes are being charged accordingly. On the POS, ring up an order with each type of item individually to make sure it is showing the current on-site tax. Then use the Ship button and test various shipping address. You can Export the orders and check all the tax rates.
Go to Dashboard > Orders and Export the State tax report
