The Shopify website product grid, sales tax, and transactions.

Why read the blog article when you can watch it on YouTube!

        I recently discovered something critical when working on my website. I was in the mental trap of how I wanted it to work vs. how it works. The issue was that I liked how product grids displayed items and that the item cards could be moved around how you wanted them. But I did not particularly appreciate that the $0.00 price shown could not be removed. I looked in chatrooms about editing the website code and learned that altering the code would wreck the retail functionality of the website. The product grid is one of several website components that work in combination, so any changes must be to all of them. In addition, my focus was on this one cosmetic issue, and I had no retail on the website, so I was unaware of how sales, transactions, and taxes worked.

        A website is accessible to everyone wherever they are online all around the world. If you do not set limits to where you sell your products, you must understand how to pay taxes and fees to regions where they are purchased. International shipping adds to the complexity. In addition to sales, transaction counts may also trigger the need for more action.

        Uduforu, LLC, is in Albemarle County in Virginia, USA. I keep sales for uduforu, LLC, as simple as possible and sell exclusively in the USA for now. I mentioned I had no retail on my website, but that is not entirely true. I offered free PDF downloads, but you had to add them to your shopping cart and check out without payment. I am sure the non-purchase purchase annoyed customers, but I did not know another way to do it. I did not tax the free PDF products. My website analytics recorded the non-payment purchases as transactions. No money was involved, so I did not think anything of it.

        A quick note on free things and the IRS. The recipient of a free thing must pay tax on the fair market value of the free item. For example, if you win an iPad or a car in a raffle or whatever, you must pay taxes on the fair market value of the prize. I will leave the particulars for you to look up in the event of your windfall. But I doubt those who downloaded my incalculably valuable PDFs have anything to worry about.

        A business pays state and local taxes where it is located. A company with locations in more than one state must pay taxes in all of those states. The term for this relationship is called a Physical Nexus. Another business term, Economic Nexus, applies to businesses making sales in states where it does not have a physical presence. Each state in the USA has a limit on sales and transactions that can be made before requiring a business to register with the state’s department of taxation. Chances are good that a small company will not suddenly have substantial sales or transactions all over, but you never know. If someone in a different state went crazy downloading my free PDFs when counted as transactions, I would have awkward communication with that state’s department of taxation and possibly the IRS.

        So, I changed how downloads work on my website to remove any concerns. I was using an app designed to handle the sale of digital products but did not need to. I uploaded the PDFs to my website files and created links to them on a page, not a product grid. On the new downloads page, you open the PDF with a link and download it: no cart, no transaction, and no fair market value. I am not fond of the look, but I can improve the presentation. I also deleted the PDFs as product items to solve the taxable inventory confusion.

        I cannot stress enough the importance of doing your research if you are thinking of opening an online store. Do not try to figure it out as you go, especially when taxes are involved. I use Shopify, and it is very user-friendly most of the time. Secure payments and tax rates are easy to set up. Shopify records but does not pay tax money out for you, though. Taxes are collected with sales and passed to the business. You must register with the necessary departments of taxation and pay out the collected tax money yourself. Be aware of the policies for the e-commerce platform you choose to use.

By the way:

        A retail category, uduforu Designs, is now up at uduforu.com! It is the reason I needed to sort out the issues with the PDFs. I have completed my tests and know where all the money goes and why. I am concentrating on t-shirts, but more products will be added. I will formally announce uduforu Designs in October 2022.