Best Way to Apply/Calculate Sales Tax?

[Fenton]

Hi,

I also posted this in the 'my account' board, but this is probably a better place. Sorry for the double posting! 

I am from New York State and am new to PayPal. I'm in the process of setting up my payment pages and see that PayPal has no way to charge sales tax by county (and NYS is a "destination tax" state) as I'm sure many other NY businesses are aware. Of course, the problem here is that zip codes overlap county lines, so sales tax could be calculated incorrectly when done by zip code.

So, rather than overcharging for sales tax and refunding a customer, or undercharging and "eating" the difference - is there a way to "hold" a transaction for "in state" customers until I can see the customer's address and accurately calculate and apply their sales tax?

I would love any advice on the best and most efficient way to handle "in state" sales that makes for happy customers and an accurate, clean papertrail for me. I think there must be quite a few other states that have the same issues - Texas, Calif, Georgia, etc.

Thanks in advance everyone!

[Fenton]

Hi,

I also posted this in the 'my account' board, but this is probably a better place. Sorry for the double posting! 

I am from New York State and am new to PayPal. I'm in the process of setting up my payment pages and see that PayPal has no way to charge sales tax by county (and NYS is a "destination tax" state) as I'm sure many other NY businesses are aware. Of course, the problem here is that zip codes overlap county lines, so sales tax could be calculated incorrectly when done by zip code.

So, rather than overcharging for sales tax and refunding a customer, or undercharging and "eating" the difference - is there a way to "hold" a transaction for "in state" customers until I can see the customer's address and accurately calculate and apply their sales tax?

I would love any advice on the best and most efficient way to handle "in state" sales that makes for happy customers and an accurate, clean papertrail for me. I think there must be quite a few other states that have the same issues - Texas, Calif, Georgia, etc.

Thanks in advance everyone!

[LawsonP]

If you learn something, let me know. Kansas is a destination state as well. I suggested multiple options that were all rejected. Why this stuff isn't computerized is beyond me. 

I asked if I could just charge a flat sales tax rate, and eat the extra costs, no. 

I asked if I could just change a flat rate for the product, and pay the taxes myself. no. 

If however, I under charge someone for sales tax, I have to make up the difference out of my income on the billing. That's ok if I do it on accident, but if I do it on purpose, they will say no. 

So, I have to go to the state of Kansas Department of Revenue web site, enter the person's address, or zip+4 and I will see the tax rate. So, what does that do for my customer? Nothing. What does it do for me? Nothing. So, if I sell to anyone in Kansas, I have to manually handle the transaction. It would be easier to just not sell in Kansas, much like New York is sounding. Please let me know if you find a solution. Just reply to this thread. 

The other option is to trust that the customer knows their own rate. 

As an alternative, can we not sell to our home state? Can we require the sales tax field be filled in for the form to move forward? Something? 

Now the young lady at the State suggested that Paypal **bleep** and their are better shopping carts. I want to use Paypal standard so I don't have to have a shopping cart. Apparently there are others out there that provide a more complete service. What a pain in the **bleep** destination taxing is. Why can't I just charge my home rate? Thanks to the lawmakers for the trouble. Good Luck. 

[Fenton]

Hi LawsonP,

In my correspondence with PayPal, all they could suggest is using a 3rd party shopping cart.  I've only briefly looked into other cart software and haven't followed thru with any decent research on them yet. After all, the whole point in using PayPal was supposed to be the simplicity of it. Go figure. I had no idea about the sales tax issue when I signed up.

So, for the time being, here is what I am doing. First, I printed out NYS's tax table. I then set my a tax rate for NYS for 8% because 61% (or 47 of 77 jurisdictions) have 8% tax. Then, I have started entering tax rates for the other jurisdictions that are either under or over. It's a daunting task to say the least. I apply ranges whenever I can and I definitely won't ever get them all in, but am trying to "hit the high spots".

This is not a 100% method either, because of course, many zip codes overlap county lines, but I'm hoping to catch most of those. I'll just have to eat or refund the difference on the few I get wrong. If it helps you out any, I found a website that actually has the split zip codes by county correct (at least for the ones I know in NYS). They even tell you how much of a zip code is in a county, so I am going with the tax rate for the county that has most of that zip.

Here is the link: MelissaData

I hope this is of some help. I will try to look into other carts as I get time and will post back if I find something that is easy to implement. Please do the same if you find something worthy in your own research.

All we can do is to keep posting about the importance of this feature.

Take care and thanks for responding to my post.

[PayPal_Olivia]

Hi Fenton and LawsonP,

The closest that we can break it down is zip codes. Someone may already have developed a third party solution for this. You might want to head over to the Developer Forums and see if you can find a third party cart there that breaks it down more finely. There are always creative folks coming up with solutions to unique problems!

I hope this helps!

Olivia

[Fenton]

Hi Olivia,

I guess I don't understand that. Why should zip codes be alot easier? There are far fewer counties than zip codes. Do you realize how many zip codes I have to enter to try and make your system work? And I mean try, because it will not work 100% of the time.

Why not create a custom percent calculation where we can enter our own description with our own percent? That would solve the problem. I would have no problem entering and keeping my 77 jurisdictions up to date. It would be my responsibility anyway, not PayPals. So, why not humor us, and add a custom field?

Come on, PayPal. Take the ball and run with it. Where is your customer service? Instead of saying 'can't' and dsmissing us, improve your service. Otherwise, we will all go elsewhere eventually.

[Fenton]

Hi Olivia,

I did as you suggested and explored the link you gave me. Unfortunately, the only thing I found regarding sales tax (and which I found very interesting) is that in 2007 people were asking for the same thing - sales tax calculated by county.

So, it appears that this is not any type of priority (or even a consideration, for that matter) for PayPal developers. Am I correct? Can you tell me if this issue is even on PayPal's radar screen? Since 4 years have lapsed and customers are still  being given the same response, I'm left to assume that it's not. So, is there a reason it is NOT being pursued?

[LawsonP]

I have a number of thoughts on the subject. 

1. I wanted to use Paypal due to the name recognition for people new to internet. 

2. I wanted to use Paypal standard. I can use a Paypal shopping cart and buttons, but I don't have the expense and technical setup of a shopping cart, or the need for a merchant account. 

3. According to the State (Kansas), you cannot overcharge someone for sales tax, so you would have to charge the lowest rate if you were going to apply some blanket solution. They also say you can't undercharge and make up the difference, which I don't know why they would care. The State also says that you can't just eat the sales tax. In other words, just change your final transaction to include the sales tax. 

4. According to the State, what can you do? Work with each customer individually. Throw away the whole purpose of automation. Deal with each customer individually. They offer links online where one can find the appropriate sales tax for their area. This can be done in two ways, zip+4, or the address. As you can tell, zip alone is not a solution. 

5. I have found that Kansas has a database available with all the current tax rates. Assuming that all states do the same thing, why isn't paypal taking advantage of this fact? Apparently these databases are updated every quarter, which is another problem with the proposed system you suggested. You would have to change each quarter. 

6. I was told by my Kansas rep that "paypal is just a crappy service". Not that that helped, but I thought it was interesting given that Paypal is a substantial player. 

So, why can't Paypal manage the state databases? Their programmers are much more likely to accomplish this than I. Collect all 50 databases quarterly and utilize the provided databases. 

Other nightmares. I also read that Paypal does not generate any type of helpful list that isolates a states sales tax for the month or quarter. One has to manually find the particular transactions. 

I want to use Paypal, I want to use Paypal standard. I may just not sell my product in my home state to avoid the nightmare of filing quarterly to each particular zip code area. If I owe a particular county 3.59 in sales tax, I have to file with that county. 

Why the states can't come up with a standard statewide sales tax rate is beyond me. Obviously the state isn't going to be any help. Why the free market hasn't come up with a work around is beyond me. I suspect they exist, and we just have to find it. I was told there are carts out there that can handle this, just haven't taken the time to access. 

I did include the links below thinking that perhaps your state might have similar data. I can go online and enter the address or zip+4 data and get the sales tax rate. 

Seems the simplest solution is to break the law, hope you don't get caught, and be as honest as you can. Kansas rates go from 6..8 to 9.6 across the state. It's almost like the states don't want revenue? Why the state can't make it easy is beyond me. Why Paypal doesn't offer a solution to such a widespread problem is another mystery. And finally, someone should shoot anyone that votes for destination sales tax options. It is and was a horrible burden to put on small business. 

I'll let you know if I find anything. I still can't imagine how to track sales 24/7 to watch out for Kansas buyers, make sure they enter the correct sales tax, hope they even enter a sales tax, pay the tax to the 105 counties and untold cities. 

My solutions: 

1. Don't sell to Kansas

2. Sell to out of state friends and have them ship it to you. 

3. Sell to local "agent" of mine locally and have them ship to customer. That way I can at least just files sales tax in my home city. I sell to "Mike", he pays the sales tax, "Mike" ships to customer. I'm sure there is something wrong with this, but something in my mind. 

Again, find a solution, let me know. I liked Paypal Standard in that I don't have to build and maintain a shopping cart or a store. Now if I have to have a shopping cart for sales tax, I'm sure the competitor will offer other solutions as well. Why Paypal would be willing to lose customers in that scenario is odd. What happened to competition and capitalism? 

This site provides information on local taxing jurisdictions and tax rates for all addresses in the state of Kansas. Choose one of the following options:

• Lookup Tax Rate By
  • Address
  • Zip + 4
• Tax Databases
  • Upload Retailer Databases - Registered retailers can get the appropriate local sales tax rates applied to their customer database through this secure application.
  • Web Services - Registered users can get direct access to the Department of Revenue's sales rate tables for customizing your system.
• Registration, Specifications and Information
  • Register now
  • Upload/Return File Format Information
  • Web Services Description Language (WSDL)

[Fenton]

Hi LawsonP,

I plan on researching some alternative carts, starting with the free ones and see what rises to the top. Until then, I'll have to make do with PayPal.

Although I certainly feel your pain as I am in a similar boat (w/broken oars!), I don't see NOT selling to your own state as a solution. I wouldn't want to turn away any sale as that never looks good to your customers no matter the reason. Options 2 and 3 sound way to cost prohibitive and your customers would likely think that something VERY HOKEY was going on.

I'm also not worried about sales tax reports as I won't rely on PayPal for those, but on my own accounting software.

As far as the states having so many different rates, it's not the state that does. At least in NYS, it's the locality tax that differs. The state share of sales tax is 4%, but the counties vary from 3% up to NYC's 4.875%. You add these together to get your total sales tax rate. I plan on getting as close as I can with tax rates and just go for it. What can I do at this point?

Hopefully, eventually, the right person at PayPal will grab onto this and run with it. Until then, they will likely a certain share of customers.

[fdea]

Fenton, I am in Ithaca. Let me know if you learn any sales tax strategies for use in NY state.

And thanks to all for the postings.

[LawsonP]

Very disappointing response Olivia.

If Papal is not aware of solutions, and it's their business, then Paypal is dropping the ball on working for their customers. Why can't paypal utilize state databases? Do all state have databases? 

If there are third party solutions, give me a link? Who is reputable? Can Paypal endorse "good" vendors? It seems to me that is in your best interest. A third party vendor may not work very well thus muddying the water as to whether the problem is paypal or the vendor. 

I want the simplicity of Paypal standard, no shopping cart, and no merchant account. I want Paypal to figure my in-state customer's sales tax at 2am in the morning. I want Paypal to spit out a report showing where I owe tax this quarter. 

If I have to shop around for another shopping cart provider, I am very likely to use their suggested vendor for executing the transaction. If they aren't Paypal proprietary, Paypal loses a customer. 

Seems you all the resources to solve the problem. Why aren't you. At the very least, offer some tangible solutions other than some vague idea that someone out there probably has a solution. Go find it. 

Of course someone has to solve the problem as paypal apparently isn't. With some continued digging, I' think we will find a solution somewhere. Problem is that I am growing irritated with Paypal, and once I find a solution I may go for a more comprehensive solution that pushes paypal out of the equation. Seems painfully obvious that Paypal should be at the forefront of solving this VERY COMMON problem. At this point Paypal doesn't even allow one to isolate sales tax paid in the home state in a report form. That's not much help.