Applying Taxes when using Barn2Door

Taxes are complex as they can change on a dime, are heavily regulated, and can be different across each state, county, city and ‘product category.’ In some states delivery or shipping fees may have separate, additional taxes. Food is taxed in some states and not in others. Taxes are calculated in 11 states one way (Origin-based taxation) in 38 states another way (Destination-based taxation) and in California it is a combination of both. To top it off if you sell across state lines (ship or deliver) you add next-level complexity.

Origin-Based States

Destination-Based States

As a seller, it is important to know whether you are located in (1) an Origin-based state; or (2) a Destination-based state. 

• Origin-based states include these 11 states: Arizona (AZ), Illinois (IL), Mississippi (MS), Missouri (MO), New Mexico (NM), Ohio (OH), Pennsylvania (PA), Tennessee (TN), Texas (TX), Utah (UT) and Virginia (VA). 

• Destination-based states include the remaining 39 states, plus Washington, D.C. 

For more detail on the specifics of Origin-based versus Destination-based tax systems, we encourage you to read this brief article.

Some states have simple tax codes, and others are a quagmire. If you sell across state lines, you will be subject to the taxes in each of those states. For example, Ohio has no tax on food, yet in Colorado taxes can vary based on what side of the street your business is on. 

Many ecommerce sites offer an integrated tax solution; Barn2Door offers an integration with both Avalara and Taxjar, for Farmers with complex tax needs While third-party tax tools cost additional money for the ‘service’ they provide to resolve tax queries in real-time, we find that the price for Avalara is roughly half that of Taxjar. They are both built to handle the complexities of taxes for businesses who sell, ship or deliver across state lines, however Avalara is considered best in its class and offers the most comprehensive tax categories and coverage.. 

For Farmers with simpler tax needs, Barn2Door has built a FREE tax tool that Farmers can use --- the Barn2Door Basic Tax Tool. 

The Barn2Door Basic Tax Tool is ideal for Farmers selling inside the boundaries of a single-state within certain delivery and tax zone parameters. In some cases, the Barn2Door Basic Tax Tool can save Farmers $1,000’s in costs associated with a third party tax solution. See tables below for guidance.

Origin-Based	3rd Party Tax Solution (Avalara)	3rd Party Tax Solution (TaxJar)	Barn2Door Basic Tax Tool
Origin-based States	Yes	Yes	Yes, except CA
Sell within 1 state	Yes	Yes	Yes
Sell across state lines	Yes	Yes	NO
Pick-up, delivery and shipping limits	Unlimited	Unlimited	Unlimited
Destination-Based	3rd Party Tax Solution (Avalara)	3rd Party Tax Solution (TaxJar)	Barn2Door Basic Tax Tool
Destination-based States	Yes	Yes	Yes, except CA
Sell within 1 state	Yes	Yes	Yes
Sell across state lines	Yes	Yes	NO
Pick-up, delivery and shipping limits	Unlimited	Unlimited	Limited to 10 pick-up/delivery locations Limited to 10 tax zones (based on zip codes)*

*Farmers can apply taxes up to 10 zones, locations or override the ‘10’ and instead apply to all.

Third-party tax solutions (e.g. Avalara, TaxJar) will automatically and dynamically pull current tax rates and apply them at the time of sale (or refund). With Barn2Door’s Simple Tax Tool, a Farmer configures their tax rates (%) per category, and optionally for delivery fees and / or shipping fees. Tax rates can be the same for all locations, or altered based for up to 10 specific locations, up to 10 specific tax zones (based on zip codes) OR they can apply one rate to all delivery zones and pickup locations. 

Farmers should consult with their Barn2Door Account Manager to find out what tax tool will work for their Farm, depending on where they live, what they sell and who they sell to. If you sell across state lines, live in a Destination-based tax state and sell both food and non-food items ---- there is a better chance you will need an third-party tax solution that can handle real-time changes to the tax system and guarantee you accuracy (good in the event you are audited!).