You may be required to collect and remit sales tax in states across the US depending on your store's location and annual revenue.
This guide provides a brief overview of sales tax nexus and how taxes are calculated in Recharge. You can also refer to our setting up taxes article for a general overview of how tax settings work in Recharge or our guide to charging taxes outside of the US for all other countries.
- Recharge Checkout on BigCommerce
- Recharge Checkout on Shopify
Sales tax nexus
Sales tax nexus refers to the connection your business has with a specific state. You must have some kind of presence in a state before you are required to collect taxes in each state.
In the past, you were only required to collect and remit sales tax if you had a physical presence in a state.
A brick-and-mortar store is the most obvious example of having a physical presence in a state, however, each state has its own rules as to what is considered a physical presence. Certain states might recognize the following examples as having a physical presence:
- Having an office or warehouse located in a specific state.
- Having an employee residing in a specific state.
- Having inventory stored in a specific state.
After the South Dakota v. Wayfair case in 2018, the Supreme Court ruled that physical presence isn't the only requirement a business must meet in order to have sales tax nexus in a state. Instead, states can now determine if a merchant must collect and remit sales tax if they have an economic presence as well.
Colorado Retail Delivery Fee
Effective July 1st, 2022, the state of Colorado (US) has implemented a Retail Delivery Fee collected on shipments delivered to a Colorado address. For more details on this fee, refer to the State Department's website here: Colorado Retail Delivery Fee.
For merchants using the Recharge Checkout on Shopify and the Recharge Checkout on BigCommerce, Recharge will add a $0.27 (cents) fee on charges with a Colorado destination address, as long as the item and/or customer is subject to sales tax.
For merchants using the Shopify Checkout Integration, Shopify automatically adds the fee to each individual charge. You will see this fee reflected on both checkout and recurring charges. See Shopify's US Tax Reference for more details.
This fee is non-refundable.
Frequently Asked Question 15 on Colorado’s site: “Returned Retail Deliveries. A retail delivery that is returned to the retailer for a full refund of the purchase price and any applicable sales tax is not eligible for a refund or credit of the retail delivery fees collected and paid on such retail delivery.”
Economic nexus refers to the economic connection your business has with a specific state, meaning you do not need to physically be located in a state to be required to collect and remit sales tax. Instead, you are required to have nexus in a specific state once you've met that state's economic thresholds.
Economic nexus laws vary per state, with each state having different thresholds defined that require you to process a certain amount of revenue, or a certain number of transactions before you are required to collect and remit sales taxes in that state. These thresholds differ per state, so it's best to consult with a tax expert to determine how economic nexus applies to your business.
Economic nexus for merchants located outside of the US
If you are located outside of the United States and your business meets the sales tax nexus thresholds set by a state, you are required to collect and remit sales taxes for that state.
We recommend reading through TaxJar's economic nexus documentation or working with a tax professional to determine if you meet state-specific tax thresholds.
Add a physical presence
By law, you are required to collect taxes on all orders created in any state where you have a physical presence. Recharge has made it easy for you to specify where you have a physical presence, and will automatically calculate the tax rate on all orders processed through the Recharge checkout.
- Click Settings and select Taxes within the merchant portal.
- Navigate to the Add physical presence section of the Taxes page.
- List the zip codes for the states where you have a physical presence and select Add.
Recharge will automatically calculate the tax for an order based on the customer's shipping address and applicable tax rates.
Economic nexus exceptions
There are thousands of tax regulations and jurisdictions throughout the US. While most tax rates can be calculated quickly by our system using your zip code, there are cases where economic nexus has a few additional complexities.
If you have economic nexus in a state and need to complete additional steps to charge the correct tax rates, like adding multiple zip codes per region, or a different rate than expected is being used, please contact our support team.
You may also consider using Avalara as a third-party integration to process more complicated tax setups.
Manually calculate US tax rates
While our automatic tax calculations work for most merchants, we recognize that there are times where you may need to charge a specific rate due to product type or customer location. The process to configure a manual tax rate varies per your eCommerce platform.
Recharge Checkout on BigCommerce
You can manually configure additional tax rates per state in your tax settings.
Before you can manually add a tax rate for a state, you must add the United States as a shipping zone in your tax settings. Contact the Recharge support team if you need to manually charge tax rates but do not charge for shipping.
- Click Settings and select Taxes within the merchant portal.
- Scroll down to the Destination section.
- Select the gear icon next to the United States.
This will take you to the Edit base tax rate page, where you can set a base tax rate for all of the US, or you can edit the tax rate for each state on an individual level, as well as change the name of the tax rate as it displays on recurring orders.
You can also choose if the rate should be added to, instead of, or compounded on to the federal tax.
Recharge Checkout on Shopify
Contact our support team with the specific state and tax rate that you need manually added if you need to manually add a tax rate to a specific state.