Preparing for Sales Tax Holidays in Shopify, BigCommerce and Kentico

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  • 7/6/2016
    Essentially, a sales tax holiday is exactly what it says. It is a period of time where sales are exempt from taxes. These holidays will often align with back-to-school and/or severe weather event preparedness.

    Taxes are confusing enough without a holiday and how they impact your customers and your business. So, understanding what a sales tax holiday is and what it means to you and your store is the first step in keeping things running smoothly. The second step, and most important, is to take that understanding and translate it to the customer experience that your online store offers. To do so, you will need to abide by your e-commerce platforms framework and configuration settings. Not all platforms are created equal and most have varying approaches to specific requirements. Below we look at 3 popular platforms and how you can configure a sales tax holiday requirement.

    The Scenario:
    In order to be as focused and helpful as possible, we will assume that we are configuring the sales tax holiday in the great Buckeye State, Ohio. You can read up on the holiday sales tax information through the State of Ohio’s Sales Tax Holiday section. It runs from August 5 to August 7, 2016 and only covers very specific products that are exempt from sales and use tax. These products include:
    • Clothing priced at $75 per item or less;
    • School supplies priced at $20 per item or less; and 
    • School instructional material priced at $20 per item or less. 

    Platform Option 1: Shopify

    Shopify will automatically calculate most state taxes and has a slick integration with Avalara AvaTax should you choose to purchase the Shopify Plus version. In the case of the exemptions and the use of its base offering, you will need to configure tax overrides. You can read about the full documented breakdown on their knowledgebase.
    1. To configure a tax override, you will first want to group the tax-modified products into a collection. For example, “Clothing priced at $75 per item or less.”
      1. You can have these products grouped through conditions instead of manually setting them.
    2. Once you have your collection, you can then add a tax override by selecting the country and state.
      1. In this case, we’d select the State of Ohio.
    3. Then, under the tax rate for that collection and state, you would enter 0% for the tax rate.
    4. After that is set, you can even narrow down the results by limiting the tax area only to certain cities and counties if necessary.
    Now that you have that set, you will want to make sure to monitor and manage the sales during the specific dates involved. I have not seen a way to apply these tax overrides over a date range in the settings, so manual monitoring would be required.

    Platform Option 2: BigCommerce

    BigCommerce, like Shopify, is a cloud-based product that has specific configuration points and options that need manipulated to accommodate the sales tax holiday requirements.
    In this case, through the use of tax classes and tax zones, you can get this right. See below for the breakdown offered:  
    1. First we create a tax class that we will call “Custom Sales Tax Holiday.” 
    2. Then create a targeted tax zone that will allow us to create tax rates in a specific region (e.g. Ohio).
    3. Once the tax zone is created, we can then create multiple different tax rates for that tax zone.
      1. In the tax rate, we can enter name and the different tax rates per tax class.
      2. For the ‘Custom Sales Tax Holiday’, we would the rate at zero.
    4. We then make sure to configure our products that this applies to. Then make sure to set the new tax class that was created for the tax class on the product. 
    5. When the holiday is over, then change the tax class on the products it applies to back to its default or normal tax class.

    Platform Option 3: Kentico

    Kentico offers a cloud product, but the majority of online stores are individually hosted implementations. Read more about the configurations through Kentico’s tax-friendly document

    To hit this specific Ohio requirement, we will approach it with a combination of point-and-click development and custom code development. 
    1. We will first create a Tax Class that incorporate the 3 types of products that are allowed in this sales tax holiday.
      1. For more information, Kentico produced a handy document that walks through the assignment process of tax codes to products.
    1. Then we will extend the programming of Kentico through their API framework to create a new tax provider that looks at the product tax classes, the shipping state, and then calculates the tax based off of those variables or zeroes it out. We can even get bonus points by programming in a date or time check that matches precisely the holiday period so that we aren’t faced with manual changes at specific times.
      1. Kentico offers a how-to guide that depicts the advanced e-commerce configuration process.
    In conclusion, should you use any of these platforms or perhaps others, I hope that you will have the confidence to get things configured properly for your sales tax holiday situation without losing your sanity.

    While the cloud-based products offer a lot in turnkey features and configurations, there will always be situations where products and software just cannot predict the future or incorporate very specific and unique business logic perfectly. They cannot accommodate every unique rule set that gets invented or materializes over time. In those cases, there are often workarounds and compromises that can be achieved, both manual and automatic.

    Of course, there are likely other ways of accomplishing these sales tax requirements, and we invite you to inform our audience of any additional ways to hit it.

    About the author:: Bruce represents Digital Development Services at thunder::tech, which encompasses our application development, digital support services, user experience design and development services. Bruce has been an integral player in growing thunder::tech’s technical capabilities and solutions offered to clients. He has helped drive clients’ growth by leveraging today’s digital tools, platforms and technologies to reach goals of any size and scope for any size business.
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