BigCommerce Sales Taxes: Edition for US Merchants
If you’re using BigCommerce as your ecommerce platform, you’re not alone. With around 50,000 live stores and thousands more added every year, many ecommerce stores love the flexibility BigCommerce offers over its competitors.
However, one difference new users need to get used to when using BigCommerce is that, unlike some e-commerce platforms that offer a native service for automatically calculating sales taxes as part of the platform, BigCommerce doesn’t. Instead, they outsource automatic sales tax calculation through integrations with popular sales tax providers like TaxCloud.
Whether you sell your products through multiple stores and marketplaces or just on BigCommerce, staying on top of your sales tax obligations can be both time consuming and confusing. With customers from across the U.S. able to buy your products via BigCommerce, your business could be liable for sales taxes in any of the over 13,000 tax jurisdictions in the U.S.
So, how do you know when you’ve reached sales tax nexus in a state and need to start charging sales tax? And how do you accurately calculate how much you need to charge in any particular jurisdiction? With BigCommerce being particularly popular among home and gardening and apparel stores – product categories many states offer sales tax exemptions or discounts on – it’s critical to choose a reliable sales tax solution.
In this guide, we’ll share everything you need to know about sales tax with BigCommerce – including BigCommerce tax setup instructions and hacks for filing BigCommerce sales tax. We’ll also help you choose the right third-party BigCommerce sales tax plugin for you.
Do I Need to Collect Sales Tax on BigCommerce?
Most ecommerce companies have sales tax collection obligations in at least one state but many also are required to collect sales taxes in other states. Whether you are obligated to collect sales taxes and where you’ll have to collect them depends on a number of factors like where your business is located, the type of products and services you sell, the volume of orders you process, and where your customers are located.
We’ll break down the basics around sales taxes and how to know where you need to collect them.
Sales Tax Nexus Thresholds
Ecommerce companies only have to collect sales tax on sales to customers who live in a state that they have sales tax nexus in.
There are two types of sales tax nexus: Physical nexus and economic nexus.
Physical nexus: A company is typically determined to have physical nexus in a state if they are located in that state or have warehouses or offices in that state. However, the rules for determining physical sales tax nexus vary slightly in different states and other factors can determine physical sales tax nexus like having an employee located in that state or even attending a trade show in that state.
Economic nexus: Economic sales tax nexus is when a state determines that you have a significant economic connection to that state as a remote seller because of the volume of business you do in that state. To achieve economic nexus, you have to meet the economic nexus threshold for that state in the preceding year. Typically, sales tax nexus thresholds involve a certain number of sales or a certain volume of sales into that state. For example, to achieve sales tax nexus in Texas, you have to have made $500,000 in sales to residents in that state in the last 12 months.
Tracking sales tax nexus can become complicated – especially if you sell on multiple marketplaces or online sites. While you can do this manually, it’s much easier to use a sales tax software provider that automatically calculates your progress towards sales tax nexus in each state and alerts you when you’ve met the threshold to register and start collecting sales taxes.
Types of Sales Taxes
Unfortunately, there often isn’t a flat tax rate that you’ll need to charge all customers in a state on all types of products. Because some states allow for municipal, county, and other special taxes, the compound tax rate that you’ll need to charge can vary by county, city, and zip code.
Keeping track of these rates is often too complicated and time consuming to do manually but most sales tax software programs will take care of that for you automatically.
Tax Rates and Exemptions
Not all items are taxed at the same rate as other items in a state since states often decide to exempt certain types of products from sales taxes or to tax that at lower tax rates. For example, some states don’t charge sales taxes on groceries while others just charge a lower rate.
There are also items like newspapers or SaaS software that are exempt from sales taxes in some states but subject to sales taxes in others. Finally, a handful of states have sales tax holidays where, for a specified number of days, certain items are exempt from sales taxes.
Staying on top of sales tax rates and exemptions across tax jurisdictions can be a full time job if you have sales tax obligations in multiple states.
Tax Registration
Once a company achieves sales tax nexus in a state, they either need to register immediately to collect sales taxes or register at the beginning of the next calendar year, depending on that state’s rules. Depending on the state, registering for a sales tax number can be time consuming – but thankfully some sales tax softwares will automatically register you for sales tax in that state once you achieve economic nexus.
How Does BigCommerce Handle Sales Tax?
BigCommerce allows customers to either manually configure basic sales tax settings or to connect their BigCommerce store with a third-party sales tax service to automate their sales tax calculations.
BigCommerce Tax Setup
Basic Tax Setup
With BigCommerce’s Basic Tax Setup, you have to manually define the tax rates for each regional zone you’re required to collect taxes in.
For example, you might need to only charge taxes for customers in one state where there is only a state tax and no local municipal taxes. In that case, you’ll have to set up a tax zone in BigCommerce for that state and add in the tax rates for different tax classes in that state. For example, the state might have a sales tax rate of 7% on most goods in the state but have a few items that are exempt or taxed at a lower rate. All that has to be inputted manually.
That becomes more complex if the state has local, county, or special taxes as you’ll have to create tax zones for each of those additional rates. That could add up to hundreds of different tax zones in a state.
Learn more about Basic BigCommerce Tax Setup.
Enabling an Automatic Tax Service Provider
In comparison, enabling an automatic sales tax provider is much simpler.
- Just go to Settings › Tax, and then click ‘Add tax service.’
- Next, you’ll need to click to Install the service you want to use. You’ll then just need to either enter your existing account information with that tax provider or set up a new account.
- Once you’ve installed that tax provider, you’ll just need to choose the regions where you want that automatic tax provider to calculate tax for you in the tax provider’s product.
That’s it. No need to manually set up hundreds of different tax classes or update them whenever the tax rates change.
Learn more about Automatic BigCommerce Tax Setup.
How to file BigCommerce Sales Tax
Thankfully, many sales tax service providers that integrate with BigCommerce like TaxCloud can automatically file sales taxes for you. That makes filing BigCommerce sales tax a breeze!
Sales Tax Plugins for BigCommerce
As mentioned, BigCommerce has integrations with four third-party BigCommerce sales tax plugins: TaxCloud, Avalara, Vertex, and TaxJar.
We’ll break down what each of them offers and what kinds of businesses they’re best for.
TaxCloud – Best Sales Tax Plugin for BigCommerce
- Link: TaxCloud and BigCommerce integration
- Pricing: Premium: $799/annually ($66.58/month).
- Overview: TaxCloud seamlessly integrates with BigCommerce to automatically calculate sales tax in 13,000+ sales tax jurisdictions across the U.S. TaxCloud monitors your sales tax nexus, can automatically register you for sales taxes in states you achieve nexus in, collects the right amount of sales taxes from every customer on every product you sell, can file your return automatically for you, and can even manage audits for you.
- Benefits: TaxCloud is cheaper than most sales tax providers with 2,400 orders per year included in its Premium plan. TaxCloud also offers highly responsive U.S.-based customer service via chat, email, and phone support.
- Best for: E-commerce businesses of all sizes.
- What customers say:
“Very positive experience, it’s easy to talk to the same people any time you have an issue, and not be bounced around through different employees. As the sole developer in a small ecommerce shop, I was in charge of selecting a company to handle our sales tax compliance. I like TaxCloud because they are inexpensive and also because their API is not needlessly complex.” – Justin
BigCommerce Avalara Tax
- Pricing: Volume-based pricing. $349 per sales tax registration.
- Overview: BigCommerce Avalara Tax options include Avalara AvaTax and Avalara Returns. However, Avalara is currently discontinuing it’s Avalara Returns product. Avalara is a cloud-based sales tax software that integrates with BigCommerce to help you charge sales tax accurately across all jurisdictions.
- Benefits: Avalara is focused on helping larger ecommerce companies manage sales taxes in multiple countries including the U.S., Canada, and Europe. Avalara can also help with sales tax registration.
- Downsides: Avalara is known to be more expensive than other sales tax compliance services and has recently been moving away from supporting small businesses by canceling services and products aimed at small businesses. Avalara AvaTax is a more expensive service than Avalara Returns and doesn’t offer signature ready returns but requires that you pay to have your returns prepared and filed for you.
- Best for: International medium to large businesses.
- What customers say:
“The amount of time my staff is saved by using Avalara to calculate and maintain Sales tax is enormous. This software accurately calculates tax and we also use it to file the taxes. The software has worked very well for us.”
See how TaxCloud compares with Avalara.
Vertex
- Pricing: Varies based on features, support, and customizations.
- Overview: Vertex is a cloud-based tax calculation company with a variety of tax products and solutions to help you do everything from calculate global sales taxes in to monitor thresholds and nexus in international jurisdictions.
- Benefits: Vertex helps companies monitor and comply with 300+ million global tax rates and rules. The company is focused on supporting enterprises
- Downsides: Vertex’s services and options are overkill for most businesses who only do business in the U.S. or a handful of companies.
- Best for: Global enterprises.
- What customers say:
“Vertex does its job and does it well. It has really helped streamline tax calculations for our accounts and creating tax rules is a breeze. The software communicates almost instantaneously with our ERP which allows order processing to flow without delay.”
See how TaxCloud compares with Vertex.
TaxJar
- Pricing: TaxJar Professional: $1,069 annually.
- Overview: TaxJar is a cloud-based sales tax software that’s owned by Stripe and was created to support e-commerce businesses with sales tax management in the U.S.
- Benefits: TaxJar provides sales tax services for small-to-medium businesses in the U.S. including sales tax filing and calculation.
- Downsides: Since being bought by Stripe, customers often complain about TaxJar’s customer service saying that it’s harder to get a response and support.
- Best for: Small businesses.
- What customers say:
“We had many issues with TaxJar like late filings which incurred penalties, incorrect tax filing resulting in $5700 more paid in taxes, complexities around state onboarding, and non-existent customer support.”
See how TaxCloud compares with TaxJar.
Interested in TaxCloud? Here’s How to Setup TaxCloud!
TaxCloud is the best option for BigCommerce sales tax for businesses operating in the U.S. since it offers more features than most other third-party BigCommerce tax services for less.
If you’re interested in using TaxCloud with BigCommerce, it’s easy to get setup. We’ll list the steps you’ll need to take below – but you can also read more here.
1. Find our app
You can find TaxCloud in your BigCommerce application. You’ll then need to download and install the TaxCloud App.
Just select ‘Store Setup > Tax and then click ‘Add tax service.’
2. Go through a quick sync process
You’ll then need to sign-in to your TaxCloud account or create one. After that, you’ll get an email with a single-use link to let TaxCloud access your BigCommerce account data.
3. Update your settings
Next, you’ll have to configure your tax settings for BigCommerce. Go to Settings > Tax > Edit in the TaxCloud app. Select “One or more countries” under Provider targeting, then select ‘United States.’
4. Use your sales tax reporting
Best Sales Tax Plugin for BigCommerce
TaxCloud is the perfect way to simplify your BigCommerce sales tax reporting. Rather than do all your sales tax reporting manually, let TaxCloud automate your sales tax compliance – and even integrate your sales tax data with QuickBooks and other accounting platforms.
TaxCloud can do the following for you:
- Monitor your sales tax nexus status
- Notify you of when you pass tax thresholds
- Register you for sales tax
- Calculate your sales taxes
- Complete your tax filings
- Remit your taxes for you
- Help you respond to audits
Simplify your BigCommerce sales tax compliance today with accurate and automated tax reporting. Learn more.