Starting April 15, 2019, Wish is pleased to announce the introduction of Tax Settings for merchants. Merchants who activate Tax Settings, on a voluntary basis, will be able to indicate the jurisdictions where they have obligations to remit indirect tax (e.g. sales tax, GST and VAT) on sales in the United States, Canada, and Europe.
Effective May 6, 2019, Wish will display and provide merchants with the payment of the estimated indirect tax remittance amounts for their configured US* jurisdictions in Tax Settings, with the exception of tax authorities where Wish is registered as a Marketplace and is collecting the appropriate tax. (*Tax Settings does not yet support the US states of Alaska, Colorado, and Louisiana; an update will be shared once they are supported).
The estimated indirect tax remittance amounts for applicable US orders will be collected from customers (as a separate sales tax line item at checkout), and included in the merchant’s next scheduled payment (subject to Payment Eligibility terms). Merchants may view the estimated indirect tax remittance amounts for applicable orders in their Order History, Order Details pages, and payment invoices.
In the coming weeks, Tax Settings will be updated to allow merchants to export tax reports for these applicable transactions within an indicated date range. More details will be shared when available.
In this FAQ, we'll walk you through some tax definitions and how Wish calculates a variety of taxes for different jurisdictions. To learn more about how to activate and edit Tax Settings on Wish, please visit this step-by-step guide. Please also review the Wish Merchant Tax Policy for more information.
United States Indirect Taxes (Sales/Use Taxes):
A. How does Wish calculate Sales/Use taxes?
Wish calculates transactional taxes (i.e. US sales and use taxes) on the sales made on the Wish platform by multiplying the sales price by a tax percentage. The result is the tax amount that is charged to the customer.
For those States that Wish is not registered as a Marketplace Facilitator (See C), Merchants may choose to utilize the Tax Settings service whereby Wish will collect tax amounts on behalf of Merchants separately from product and shipping costs. Merchants will receive these tax amounts as part of the normal payments process (less any refunds/deductions).
Example of the sales tax calculation:
San Francisco, California, 8.5% tax rate, and the customer purchases a $5 item.
|Sales Tax Calculation||5.00 x 7.25%||$0.43|
|Total Invoice Amount||5.60 + 0.40||$5.43|
This will be shown at the invoice as:
Due to system limitations Sales/Use taxes will be calculated based on the destination location only, and origin-based taxation will not be currently available. Origin based taxation may be possible in future releases.
Many different factors affect the amount of tax on a sale. For sales taxes, those things include the product, where the sale takes place, the time at which the sale takes place, and how many other sales have occurred in the same jurisdiction throughout a specific time period.
- Some States may exempt certain foods from sales and use tax
- Some States may impose higher taxes on tobacco products
- Each State may have a different tax rate
- Many cities also charge sales and use taxes at different tax rates
- Some States have sales and use tax holidays, when some or all sales are exempt from sales and use taxes
B. What is nexus?
Nexus is a special type of connection that a company must have with a U.S. taxing jurisdiction if that jurisdiction wishes to impose its tax on that company. The term and concept comes from United States Supreme Court jurisprudence that governs States’ power to tax out-of-State entities. The nexus standards vary by depending on the jurisdiction’s own rules and decisions, and the standards within a jurisdiction may be different for each tax type (e.g., income tax, sales/use taxes, property tax, etc.). For sales/use tax purposes, sellers that have nexus in a State generally have an obligation to charge customers in that State sales tax on taxable sales made to them, collect that tax from the customers, file a sales/use tax return with that State, and remit the tax collected and due to the State.
What constitutes sufficient nexus for tax purposes depends on the jurisdiction’s definitions and rules. Generally, a seller creates nexus with a jurisdiction by being physically present in that jurisdiction (having an office, some type of business location, warehouse, employees – whether fixed or for a temporary period of time). Over the past several years, some States have sought to expand their nexus definitions to include the activities of third parties (related or otherwise) and other temporary activities. In June 2018, the United States Supreme Court issued a ruling that enables States to expand their nexus definitions even further: in some States, a seller with enough sales in a State likely has a nexus with that State. For example, if a seller’s makes greater than $100,000 of sales or makes 200 separate transactions with customers in the State in the previous 12-month period, then the seller will be deemed to have nexus in the State.
Nexus determinations – and collection and remittance obligations – get a bit more complicated with respect to online marketplaces like Wish. Many States have expanded nexus requirements to include certain activities by online marketplace operators, even though the operator isn’t really the seller. As explained above, nexus is a legal connection between a U.S. jurisdiction and a seller, a sale, or a party that helps facilitate a sale. If there is nexus with a seller, a sale, or a sale’s facilitator, the State may require the seller or Wish to charge and collect its customer’s sales and use taxes.
Wish has determined that it is a “Marketplace Facilitator” in respect of the online marketplace it operates, which leads to an obligation for Wish to collect and remit VAT/GST and sales taxes in certain countries/U.S. states. When a merchant has nexus in a particular jurisdiction and it elects to use the Tax Setting service, Wish will charge and collects sales and use taxes for each sale and sends those funds to each seller, which must then send those funds to the States.
All of these nexus factors are accretive, meaning a seller only needs to satisfy one test to have nexus with a State. A seller does not need to satisfy all the tests. A seller is likely to have nexus if (1) the seller is physically present in the State OR (2) the seller sells more than $100,000, OR (3) the seller makes more than 200 separate sales in a State. Please note that these tests DO NOT say that seller’s failing to meet all three tests lacks nexus. Theoretically, a seller physically absent from a State that sells less than $100,000 in less than 200 transactions could still have nexus with a State.
Whether a seller has nexus is a State-by-State question. Just because a seller has nexus in one State does not mean that the seller has nexus with each State in the United States.
When a seller informs Wish that it has nexus with a State or Wish determines there is an obligation as a marketplace operator to collect and remit tax, Wish’s system charges and collects sales and use taxes from the seller’s customers for each of the seller’s sales on the Wish platform. Then, depending on the State, Wish either passes those funds to each seller (which must then send those funds to the States) or sends the tax directly to the State in Online Marketplace States (see separate FAQ).
C. In which States does the Wish Marketplace collect and remit sales tax on behalf of Merchants?
Some States have enacted “Marketplace Facilitator” rules, which require marketplace facilitators to collect and remit sales tax on behalf of marketplace sellers if certain requirements or thresholds are met. In States where Wish collects and remits sales tax on behalf of sellers, Wish has determined that it is considered a marketplace facilitator due to the online sales marketplace it operates. Concurrently, Merchants that make sales through the Wish Marketplace are considered marketplace sellers due to their sales on the Wish marketplace. States’ specific rules vary, but generally a marketplace facilitator is required to collect sales tax on retail sales made by a marketplace seller if sales through the marketplace reach a particular sales amount or volume threshold. For many States, this threshold is at least $100,000 of in-State sales or 200 separate in-State transactions, but some States have set forth other thresholds; the rules vary on a State-by-State basis.
For States in which Wish is registered and considered a marketplace facilitator under State law, Wish will collect sales tax and remit to the State on behalf of all Merchants that make sales into that particular State. Merchants that make sales through the Wish marketplace are generally not required to collect and remit sales tax on their sales made through the Wish marketplace in those States in which Wish is required to collect and remit tax. (Note that there are a few exceptions to this general understanding.)
In the following jurisdictions (subject to change), Wish will collect and remit sales tax to the jurisdictions for all in-State sales occurring on its marketplace:
- District of Columbia
- New Jersey
- South Carolina
- South Dakota
D. In which States may Merchants have an obligation to collect and remit sales tax on their own?
In all States other than those listed above as States where Wish will collect sales tax as a marketplace facilitator, Merchants who make sales through the Wish Marketplace may have an obligation to collect and remit sales tax based on their sales into a respective State. Merchants may be required to collect and remit sales tax on their sales into a State on their own if they are deemed to have sales tax nexus in a State. For an explanation of what this means, please see the FAQ, “What is Nexus?”
In many States, local jurisdictions such as counties and cities, may have a level of autonomy to impose additional sales tax requirements. These additional local-level requirements may range from simply adding an additional rate to establishing an entire sales tax system in addition to that of the State. Please see below for further considerations regarding Merchants’ potential sales tax obligations to various State and local taxing authorities.
E. States with uniform State and local sales tax rates
In most States, Merchants are required to collect all local taxes if they collect the State tax. Such States generally apply sales tax rules uniformly to all sales throughout the State: all local filing jurisdictions (e.g., city or county) have the same nexus and sales tax applications as the State.
In these States, nexus is generally set at the State level and not considered at the local level. For such States, when a Merchant confirms in its Wish tax settings that it has nexus in a State, any additional sales tax requirements for local jurisdictions will automatically apply to that Merchants’ sales in that State as well. Based on this, a Merchant with nexus in a State will have an obligation to collect and report sales tax on all taxable transactions within that State regardless of the sales destination within the State. For example, if a Merchant selects a nexus configuration for Iowa, all of the local jurisdictions within Iowa will be deemed to have nexus as well. Wish Merchants are still able to search or filter their Wish nexus settings by specific local jurisdictions, however their nexus cannot be modified at an individual jurisdictional level.
Not all States apply sales tax according to this method. Please see below for further explanation of those States where sales tax is administered differently.
F. States with State-administered local jurisdictions
Some States administer local jurisdiction (e.g., city or county) sales taxes at a State level. These State-administered taxes are collected by filing a single sales tax return with the State that captures all applicable tax. The local rates for each jurisdiction may vary, and filing obligation for each jurisdiction is determined based on nexus.
In the following States, sales tax in all local jurisdictions is State administered:
Note that some local jurisdictions in Colorado are State administered.
The States listed above have a variety of local jurisdictions that calculate sales taxes in addition to the State-level sales tax. For example, a Merchant may have nexus in the State of California and on top of that, also have nexus in San Francisco, California. Merchants must individually determine those local jurisdictions in which it has nexus in addition to State-level nexus. There are certain scenarios where a Merchant may want to indicate nexus only at the State level and not at the local jurisdiction level. In such a scenario, the Merchant would not select any local jurisdictions for that State in its Wish settings, and only select the State where it has nexus. Under this scenario, only the State-level sales tax rate for that State would apply.
Note that in practice, many businesses opt to avoid the administrative work of determining where local rates apply based on nexus and instead opt to collect all local sales taxes. A Merchant seeking to avoid this administrative burden may elect to collect all local sales taxes within a State in which it has nexus rather than do a jurisdiction-by-jurisdiction nexus review. Also note that regardless of the number of jurisdictions for which nexus is selected, usually a single sales tax return that includes information reporting for both State and local sales is required for these States.
According to Wish policy, Merchants are responsible for correctly configuring sales tax nexus at the State and local levels.
G. Home-rule States
A handful of States may require both a State-level filing and additional local-level filings. These States have “home rule” jurisdictions, which means that the States have granted sovereignty to certain cities and counties within their State that permits these jurisdictions to levy and/or administer their own sales taxes. In home-rule jurisdictions, the sales tax system can be considered an entirely separate system from that of the State: the tax is administered and collected locally by the jurisdiction, and the sales tax rules can be different from those of the State and those of other local jurisdictions. For sales tax compliance, additional filing obligation may exist for Merchants with nexus in a home-rule local jurisdiction.
In the following States, Merchants may be required to comply with additional filings for a local-level taxing authority:
To determine where additional filings may be required, Merchants should review their activities in the States above at a local level to determine where nexus may exist in local jurisdictions. If a Merchant has nexus in a specific local jurisdiction that has home-rule status, it may also have a sales tax filing obligation in that local jurisdiction.
Note that application varies by State. For example: Alaska has no State-level sales tax, however local jurisdictions may administer their own sales tax. Some but not all local jurisdictions in Colorado are self-administered. (But note that certain jurisdictions in Colorado require local sales tax collection for all Merchants with State-level nexus, see explanation above). All local jurisdictions in Idaho and Louisiana are self-administered. Other specific administration practices may vary by State.
Per Wish policy, Merchants are responsible for correctly identifying their filing obligations and collecting and reporting sales tax.
Non-US Indirect Taxes (VAT/GST):
A. How does Wish calculate VAT/GST taxes?
Where Merchants elect to use to Tax Setting service in Europe, Wish will calculate VAT on European domestic sales where the Customer (ship-to address) is located in a country where the Merchant is VAT registered. The sales price is inclusive of VAT, i.e. there will not be a separate tax line or an additional amount collected from the customer. Unlike sales into the United States, VAT will not be paid in addition to the normal Merchant payments for items sold on the platform. To avoid invalid European VAT calculations Wish will not calculate VAT on transactions shipped by Merchants who are not domiciled (primary place of business) in Europe unless they are Wish Express or Fulfillment by Wish (FBW) orders. In other words, this is an attempt to avoid calculating VAT on orders being shipped to European customers from locations outside of Europe, where the Merchant is not the Importer of record.
Example of the VAT calculation
– France, 20% VAT rate, and the total invoice amount to pay is EUR 10
|Taxable base||10 / 1.20||EUR 8.33|
|VAT Calculation||8.33 x 20%||EUR 1.67|
|Total Invoice Amount||8.33 + 1.67||EUR10.00|
This will be shown at the invoice as:
“Item” …………………….. EUR 10
The VAT is 16.67% of the order total
Where Merchants elect to use to Tax Setting service in Canada, Canadian taxes (GST/HST/PST/QST) will be handled similar to the United States sales taxes. Wish will collect Canadian taxes on behalf of Merchants separately from product and shipping costs. Merchants will receive these Canadian tax amounts as part of the normal payments process (less any refunds/deductions).
Many different factors affect the amount of tax on a sale. Such as whether a product qualifies for a zero or reduced rate or where the sale takes place.
- Some jurisdictions may exempt or zero rate certain products from tax (e.g. foods, medical products)
- Each jurisdiction may have a different tax rate, and some have multiple taxes on a single transaction
- Example of the GST calculation
- Canada, British Columbia 12% GST/PST rate, and the customer purchases a 10 CAD item.
|Sales Price||10||CAD 10.00|
|VAT Calculation||10 x 12%||CAD 1.20|
|Total Invoice Amount||8.93 + 1.07||CAD 11.20|
This will be shown at the invoice as:
Order total………………….CAD 11.20
B. What are the threshold requirements for a Merchant to VAT/GST register for non-US countries?
Every country will have their own thresholds and requirements before Merchants are required to register with the national taxing authority and collect and remit tax on sales (i.e. VAT, GST, etc.). It is the responsibility of the Merchant to determine if they are making taxable supplies (i.e. a qualifying good) to Customers that creates a tax registration obligation.
Registration thresholds are typically exceeded, in some countries, when a Merchant’s taxable supplies exceed a stipulated turnover amount, commonly in a 12-month period but may also be accumulative. Countries that do not apply a registration threshold generally require registration, regardless of volume or monetary amount of sales, as soon as the supplier makes a qualifying taxable supply.
- Registration Threshold applied: Australia - as of February 2019, an entity, whether in or outside of the Australian indirect tax zone, and whose current or projected annual turnover is currently at least equal to AU$ 75,000 (excluding GST) is required to register for GST.
- No Registration Threshold: Germany - as of February 2019, non-German businesses supplying taxable goods or service are generally required to register for VAT, even if the total value of supplies EUR1.
C. In which countries does the Wish marketplace collect and remit transaction tax on behalf of the Merchants?
Some countries and have enacted regulations which require online Marketplace Facilitators to collect and remit tax (i.e. VAT, GST, etc.) on behalf of its Merchants if certain criteria are met. In countries where Wish has met these requirements, they will collect and remit tax on behalf of its Merchants.
In some instances, Wish may enter into agreements with local postal carriers to facilitate the remittance of transaction taxes to the authorities. The postal carrier is required to collect the transaction tax before the goods are released for delivery to the customer. In these situations, Wish is likely to ‘withhold’ the tax due and the carrier may be deemed to be the supplier for compliance administrative purposes (i.e. the one required to report the tax to the tax authority).
These arrangements will provide convenience to the customers where they will not be obligated to connect with the postal carrier to pay the applicable taxes.
In the following jurisdictions, Wish will collect and remit, or withhold, tax for all sales occurring on its marketplace:
- Sweden (withholding tax on sales which are delivered through PostNord)
- New Zealand (from October 1, 2019 and once tax registered).
D. In which countries may Merchants have an obligation to collect and remit transaction tax on their own?
Merchants who make sales through the Wish marketplace may have an obligation to collect and remit tax based on their sales into a respective country, where Wish does not collect on their behalf. This obligation may be subject to the value of the goods.
- UK will require Merchants to collect and remit tax on sales where the sale does not exceed GBP135
The Merchant shall be required to provide Wish with details regarding its sales (e.g. volume, value, tax collected, tax remitted, etc.) for Wish to perform periodic reviews that the Merchant is fully compliant with the local law, where the Merchant is liable and Wish has a legal obligation to confirm the Merchant’s tax compliance. Where the Merchant fails to be compliant, Wish reserves the right to remove the Merchant from its platform.
To receive support for issues with your Tax Settings, please email Wish at firstname.lastname@example.org. When you reach out, please include your merchant ID and a description of the issues you encounter; be sure to copy your Account Manager in your email as well, so we can review and address your question in a timely manner.