Paloma helps with automatically charging the relevant sales tax for your store and customers at checkout. Read below to learn about how this gets applied, and how to configure your store's taxes.
Note: Paloma is currently only available for merchants in the United States. It is each seller's responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates, and to ensure you file and remit your taxes correctly.
In this guide we'll cover how to determine tax liability, registering your business in the states where you do have tax liability, and adding those states to your Paloma settings.
Table of contents
Determine if you need to charge sales tax
Having a tax liability means you are required to collect tax from your customers and remit it to a state. Whether or not you have a tax liability is typically determined by physical nexus or economic nexus.
Physical nexus
Physical nexus generally occurs when you have a physical presence in a state, such as the place where you work, have a store, warehouse, or employees.
At minimum, you have physical nexus in the state where you are based.
Some states have different definitions for physical nexus, so if you're not sure if you have physical nexus in other states, it's always good to consult with state tax authorities or a local tax professional.
Economic nexus
Economic nexus is based on reaching a certain volume of sales from customers in a specific state.
The amount of sales required to reach economic nexus in each state varies, so if you're not sure if you have economic nexus in other states, it's always good to consult with state tax authorities or a local tax professional.
Register with state tax agencies
Once you've determined that you need to charge tax in a given state, you can register with the state's tax authorities. Each state has a different contact and registration process.
Set up your state taxes in Paloma
Now that you know where you're registered for taxes, you can set them up in Paloma:
Store settings
In your Paloma app, go to Settings > Taxes
Select the dropdown menu and choose the option that best applies given your state tax registrations
If you are registered to collect any taxes, you'll be asked to enter your primary location
If you selected that you will be collecting taxes in multiple states, choose the states that you have a tax liability for
Save your settings
Understand how Paloma applies sales tax at checkout
When your customer is placing an order, they will first be asked for shipping information. When their shipping information is shared, Paloma leverages a third party called TaxJar to get the most up-to-date tax rate for their zip code. If you have the customer's state listed in your Paloma settings as a state that you are registered to collect taxes in, the appropriate tax rate is then applied at the checkout screen.
Any trouble? Questions? We're here to help!
Use the Help button in the bottom right corner of app.getpaloma.com to start a chat, or email us at support@getpaloma.com.
If you have further questions about whether tax legislation applies to you, then you should contact US state tax authorities or a local tax professional.