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Premium Report - US Tax Thresholds

US Tax Thresholds

This report is for merchants who collect sales tax in the United States so they can see the tax thresholds on a state-by-state basis.

This is report is vital to see any states where you may be over/under collecting and adjust your tax setup accordingly.

Establishing Nexus

In order to understand this report, it's first important to have an understanding of what constitutes a Nexus for the purposes of collecting Sales Tax.

As our main guide here explains, Nexus can be either physical (you have a physical presence in the state, e.g. a store) or economic (you exceed a certain sales threshold for that state):

Generally speaking, what this means is that you need to be collecting sales tax if either:

  1. You are shipping orders to a state you have a physical presence in.

This former part is easy - merchants tend to know which states they operate in, and the rules are straightforward - you need to be collecting, period.

  1. You are shipping orders to a state and the total orders in the current/previous calendar year exceeds the applicable Revenue and/or Transactions threshold for that state.

This latter part is much harder to determine. Not only are the thresholds different for every state, but whether you do/don't need to be collecting for a particular state can actually change, year over year.

Here is where the Tax Threshold report comes in!

Using this report, you can see what the thresholds are for each state (# of transactions/$ amount), the # of orders/revenue you have for that state, and any actions you need to take.

Here is what you need to be familiar with to understand the US Tax Thresholds report:

1.) Is Marketplace Exempt Order= False: This filter ensures that if something is a sale via a marketplace (e.g. Tiktok, Etsy, etc) AND a state excludes Marketplaces from threshold calculations (see #4 below), then it is NOT included in the report.

**2.) Shipping address/State or Province:**The state or province for where the orders were sent.

**3.) Tax Threshold/Type:**Whether the threshold for that state is Revenue Only, Either, Both,orNo Sales Tax

  1. If a state is Revenue Only, this means there is only a Revenue threshold for that state.
  2. If a state is Either, then meeting either one of these requirements (Revenue or Transactions) will put your store above the threshold.
  3. If a state is Both, then only meeting both of these requirements (Revenue and Transactions) will put your store above the threshold.
  4. If a state is No Sales Tax, then it means the state does not charge Sales Tax and so there is no threshold to exceed accordingly.

**4.) Tax Threshold/Marketplaces:**Whether or not marketplace sales (e.g. Tiktok, Etsy) are Included, Excluded, or No Sales Tax.

  1. If a state is Included, then Marketplace sales DO count towards meeting the threshold for that state (below)
  2. If a state is Excluded, then Marketplace sales DO NOT count towards meeting the threshold for that state (below)
  3. If a state is No Sales Tax, then the state does not charge Sales Tax and so there is no threshold to exceed accordingly.

**5.) Tax Threshold/Revenue:**The revenue threshold for that state.

**6.) Taxable Revenue:**The amount of revenue for that state so you can compare vs. the threshold.

This is normally the Net Sales, unless the state taxes shipping, in which case this is Net Sales + Shipping.

Note - Taxable Revenue automatically excludes any Sales were the product is marked as non-taxable (Taxable = False), or any sales from Customers that are marked as exempt (Tax Exempt = true)

**7.) Tax Threshold/Transactions:**The transactions threshold for that state, if applicable.

**8.) Orders:**The number of orders you have that shipped to that state. This you can cross-compare with the transactions threshold (above) to see how close you are to exceeding the threshold.

**9.) Taxes:**The amount you have witheld in Sales Tax for that state.

**10.) Tax Threshold/Status:**The status for your sales vs the respective threshold for that state. The possible options here are:

  1. Collecting, Under Threshold. States where you are currently collecting taxes but haven't met the threshold.**
  2. Not Collecting, Over Threshold. States where you are not currently collecting taxes but you have exceeded the threshold.
  3. No Action Required. The default option, either because you are over the threshold and are collecting taxes, or because you are under the threshold but aren't witholding taxes.

Like all Report Toaster reports, these reports are fully customizable - so you can adjust the date range, add/remove columns, introduce a filter or change the sort to suit your individual needs. See our basic guides here for more info.