As your trusted print-on-demand (POD) company based in New York, we would like to talk to you about a subject that might seem tricky but is crucial to maintaining a transparent, legally compliant, and smooth-running business. We're talking about the requirements that exist for paying sales tax on any orders sold and shipped to customers in the state of New York.
You might be asking, "Why do we need to do this?" Let us explain.
Sales tax is a tax imposed by governments on the sale of goods and services. It is usually a percentage of the cost of the goods or services being sold and is added to the sales price. The purpose of sales tax is to generate revenue for the government to fund essential public services.
The Nexus Concept
In the U.S., the right to impose sales tax is held at the state level, meaning different states can have different rules and rates. The concept of nexus, or a business presence, in a state is central to the imposition of sales tax. If a business has a nexus in a state, it must collect and remit sales tax on sales made to customers in that state.
As a business headquartered in New York, we have a physical presence – or Nexus - in this state. Therefore, we are obliged to collect and remit sales tax for orders shipped to customers in New York – or confirm that it has been paid already (say, by a marketplace, or by you directly).
The Wayfair Decision
Things got more complex with the landmark Supreme Court decision in the case of South Dakota vs. Wayfair Inc. in 2018. Before this decision, businesses were only required to collect sales tax in states where they had a physical presence. However, the Court’s decision allowed states to impose sales tax obligations on out-of-state sellers who sell goods into their state, even if they do not have a physical presence in the state, creating what is known as economic nexus.
While New York state had already established rules requiring certain out-of-state sellers to collect sales tax, the Wayfair decision further solidified the state's ability to enforce those rules.
Impact on POD Sellers
As a print-on-demand company, we operate by printing products only after an order has been placed, thereby eliminating the need for inventory. In this model, the actual Seller (you) are often based in a different location than the printing company (Casestry) and your Customer.
Although we do the printing and shipping, the taxable sales transaction is actually between you – the Seller - and your Customer. This means that sales tax applies to the transactions and needs to be collected and remitted by law.
We want to ensure that we are following all applicable laws, maintaining transparency, and keeping the trust that you place in us. This is why it is necessary for us to implement a Sales Tax process for orders shipped to New York addresses.
The Resale Exemption: An Option for Sellers
For our Sellers who are also running their own businesses, we'd like to introduce you to an important aspect of the sales tax landscape: the concept of a Resale Exemption. This is important if you're purchasing goods or services with the intent to sell them to your customers, as it could provide you with a sales tax exemption.
To understand how this works, let's first clarify one thing. Generally, sales tax is intended to be paid by the final consumer of the goods or services when they purchase or receive those goods.
If you are registered as a Reseller in New York, you can be exempt from having us apply taxes on purchases that ship to customer addresses in the state of New York.
Your sales transactions can sometimes happen on a website or shop you own and operate (say, a Shopify store) - and for which you are directly collecting payment from the customer. Or they may happen on a Marketplace (say, Etsy, or Ebay) that manages payment processing, disbursement of payments to you, and tax collection on your behalf.
If you are selling through a Marketplace that handles this for you, you can also be exempt from having us apply taxes on purchases that ship to customers addresses in the state of New York. In the US, marketplace facilitators are required to collect sales tax on behalf of third-party sellers when they reach economic nexus in the state. However, sellers are liable for tax if the marketplace facilitator does not collect it.
Either way - both of the above situations require a Resale Certificate to be completed and submitted for our records, which we are providing below.
In New York State, to be eligible for the Resale Exemption, you'll need to fill out form ST-120, also known as the "Resale Certificate." This document is your way of stating to suppliers (like us, your POD company) that the goods or services you're purchasing are intended for resale to your customers and that taxes are being settled by you or your marketplace.
The essential part of this process is that you need to have a valid sales tax registration number. If your business is not based in New York, this would be a sales tax registration number from your own state (or if you are operating as a sole proprietor, you Taxpayer Identification). It's essentially an identification number that associates your business with its tax obligations and should be included on the ST-120 form.
By providing us with a completed ST-120 form, we can exclude the sales tax on transactions that you're planning to resell to your customers. But remember, by claiming a resale exemption, you're taking on the responsibility to collect and remit the sales tax from your customers (either directly or through your marketplace partner).
If you scroll down on this page you can see brief instructions to help you with this form.
Filling out Form ST-120
It's important to note that the rules around resale exemptions and how to properly claim them can vary from state to state. We recommend consulting with a tax professional to understand your obligations and ensure you're following all appropriate procedures.
You can find Form ST-120 HERE
What Happens if I don’t submit a completed Resale Certificate to Casestry?
In the event you do not provide us with this document, Casestry will attach the Sales Tax to your normal invoice for any orders shipped to New York Addresses. There are two elements of this tax:
New York State Sales Tax of 4%
Local Taxes which vary by region but range from 3% to 4.875%
A full tax table list showing the specific percentages based on zip codes can be accessed HERE, if you need to set this up in your store or otherwise calculate applicable tax in advance.
It's important to note that the rules around resale exemptions and how to properly claim them can vary from state to state. We recommend consulting with a tax professional to understand your obligations and ensure you're following all appropriate procedures.
Conclusion
As we've said before, our goal is to maintain transparency and compliance with all state and federal laws. We're here to help facilitate this process as much as we can, but ultimately, it is your responsibility to understand and manage your own tax obligations. We’re required to assess taxes on the value of the items at the price we sell to you when we do not have paperwork on file for you or your business. Again, legally, you’d still be responsible for the remainder (we are only collecting a fraction of the total sale value, and we do not know your total sale value) - but regardless this is the requirement we have to be compliant with our Nexus in New York.
The world of sales tax can be complex, but it's vital for maintaining a compliant and trustworthy business. We appreciate your understanding and cooperation as we work through these necessary changes.
Please note that this blog post is intended to provide a general understanding and should not be used as a substitute for professional tax advice. Always consult with a tax professional for your specific circumstances.
Stay tuned for further updates on how we will be implementing these changes in our systems to ensure a seamless transition. We are here for any questions or concerns you may have about this process.
Thank you for your understanding and for being a valued part of our POD community!
