Why am I being charged sales tax?
CustomCat is legally required to collect sales tax on goods purchased in certain US states unless documentation is submitted indicating our transactions with your business are exempt from taxation. A few reasons your transactions with CustomCat may be exempt from taxation include:
- You resell the products you purchase from CustomCat on a marketplace such as Etsy, Amazon, or eBay on which tax is collected by the marketplace at point of sale;
- You are reselling items purchased from CustomCat on your own ecommerce store, you have nexus in the state to which the order is shipping, & you charge your customer sales tax at point of sale.
This list is not exhaustive, but includes some of the most common reasons a CustomCat user may submit an exemption certificate. We are not tax professionals. We recommend you consult a tax professional for advice on your particular tax situation.
What is nexus?
Nexus is a legal connection that allows a state or municipality jurisdiction to apply its tax policy to your business. You may have nexus in a particular state if your business is physically located there or if you sell products to a consumer located there. Each state has its own guidelines regarding exactly what triggers nexus within their state, so please consult a tax professional for help determining your particular tax situation.
What if the marketplace I sell on charges sales tax?
If you sell products purchased from CustomCat on a marketplace (such as Etsy, Amazon, or eBay), that marketplace is responsible for collecting sales tax at the point of sale. Because tax is charged when your customer purchases the item, you may be eligible for tax exemption during your transaction with CustomCat if you submit a Marketplace Facilitator Exemption Certificate within your CustomCat account. Please use the tax module to Add a Certificate — our Tax Wizard will walk you through the correct form.
**Please note that the state of Hawaii does not accept a Marketplace Facilitator Exemption as a valid certificate of exemption.
Do internationally based sellers have to pay sales tax?
Yes. Businesses should be registered within the United States in order to sell goods to US consumers. Sales tax must be collected by registered businesses when selling goods within the United States, though the tax rate may change based on the state in which the sale occurs.
How is sales tax calculated?
The total sales tax to be collected on a transaction is a specific percentage of the sale price, though that percentage varies based on the state in which the sale occurs. Each state determines its own sales tax rate for eligible goods.
For sales in which states does CustomCat charge sales tax?
CustomCat will charge sales tax on orders shipping to Alabama, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, & Wyoming.
Can I submit exemption certificates for states not listed?
Yes. We will accept exemption certificates for any US State and encourage users to submit documentation for all states that an exemption is applicable. These certificates will be processed & kept on file in the event CustomCat begins to charge sales tax in those states in the future.
Which form do I use for each state?
We have a wizard that will walk you through it! Simply select the state & the reason you’re claiming an exemption to begin completing the appropriate form. Once the module is completed, your completed certificate will be available for download as a pdf.
Some states require forms that are specific to that state. Others have reciprocity with other states, allowing the same form to be used in multiple states. If the state you select in the module accepts a multi-state form, the other states that accept that form will be listed for you to add.
What is a resale certificate?
Simply put, a resale certificate is a legal document stating the purchase of wholesale goods is tax-exempt because you will be reselling them & collecting tax from your customers at the point of sale.
How do I submit a resale or tax exemption certificate?
To submit an exemption certificate, open the “Taxes” tab of your CustomCat account settings. Next, click “Add Certificates” and select the state for which you’d like to submit an exemption. Enter your business address, then select the reason you’re creating an exemption certificate: 1) you resell on Etsy, Amazon, eBay, or other marketplaces or 2) you resell on your ecommerce store. Depending on your answer, you will be guided through the appropriate document for that state. When you’ve completed all required information, click “Submit” to send the completed certificate to CustomCat.
For step-by-step instructions, visit our tutorial on Submitting a Tax Exemption Certificate.
When will sales tax be charged?
Sales tax will be collected on any eligible order processed on or after April 1, 2022 at 12:01am EST if it is associated with accounts which have not submitted an exemption certificate in the state to which the order is shipping.
How do I know if I’m exempt from paying sales tax to CustomCat?
You may be exempt from paying sales tax to CustomCat if you have nexus in the states for which CustomCat is collecting taxes & are already charging your customers sales tax, or if you are reselling goods on a marketplace like Etsy, Amazon, or eBay. Please consult a tax professional for information specific to your business. We will charge sales tax for all transactions in states in which we have nexus unless an exemption certificate is submitted.
What if I already submitted a certificate to CustomCat via email?
If you’ve already submitted an exemption certificate to CustomCat, please review your CustomCat Taxes tab to determine whether you need to resubmit it. Processed exemption forms will be displayed within the “Taxes” section of your CustomCat account settings. If your certificate is not listed for each state, please resubmit it through the in-app module for all states to which it applies. Please note that your exemption certificate will only apply in the state listed — you may need to submit a certificate for other states in which you have an exemption.
What information do I need on hand to submit an exemption certificate?
In order to submit an exemption certificate for your registered business, you will need your applicable state sales tax identification number(s) & your business address. When submitting a Marketplace Facilitator Exemption Certificate, you will need your business name & business address.
Do I have to submit these forms every year?
Expiration dates of these tax certificates vary by state & certificate type. The expiration date of every certificate you submit is visible within your CustomCat account settings.
What happens if I don’t upload my exemption certificate but I have one or qualify for one?
We will charge sales tax for every sale associated with an account that has not submitted an exemption certificate. Failure to submit your exemption certificate will result in collection of sales tax on your eligible orders. Sales tax will not be refunded in the event that you fail to submit your exemption certificate.