TaxCloud not calculating taxes correctly

-- HikaShop version -- : 2.5.0 Business
-- Joomla version -- : 3.4.3
-- PHP version -- : 5.4.28

Tax cloud is not calculating taxes correctly, at least not for Colorado. I just got of the phone with TaxCloud confirming this. In Colorado you only need to collect taxes depending on the shipping address in relation to your store presence..

1. Out of state no tax. Taxcloud is setup to collect tax for another 24 states and it is a $10/mth fee to remove this "compliance".
2. If the address is in state collect state tax.
3. If the address is in the same county add county tax.
4. If the address is in the same city add city tax.
5. There are some local transport authority taxes etc. that need to be added if the address is in the same jurisdiction.

TaxCloud returns the total "local" sales tax no matter which of the above conditions are met. According to our phone call this is not an error this is the way it works. While they may return the correct sales tax for a specific address it DOES NOT return the correct sales tax when you are shipping to an address outside your city or county.

Hi,

I'm not following you.
Especially the last sentence:

While they may return the correct sales tax for a specific address it DOES NOT return the correct sales tax when you are shipping to an address outside your city or county.

HikaShop always sends the "specific address" of the customer to TaxCloud, even if the shipping address is outside your city our county. So I don't understand what you're trying to say.

If I understand the original poster comments correctly, this isn't a HikaShop problem at all. It's a limitation of the TaxCloud service and how they calculate the taxes based on origin and destination addresses. HikaShop is sending all of the correct information, but what's coming back is not being calculated 100% as it should be. It sounds like TaxCloud is doing a simplified tax calculation unless you upgrade the account to include more advanced calculation capability.

A lot of companies try to calculate taxes using simple formulas. A common example is calculating taxes using USA zip codes. (For a video of why this is wrong, see www.avalara.com/blog/2015/08/13/getting-...on-wills-whiteboard/ ) The problem is that there are thousands of variables and unique tax situations where a simplified calculation will result in a very wrong tax amount. The Colorado example you give is just one of them. Trying to take the easy way to calculate taxes with simple destination tax rules or by zip codes, rather than fully complying with ALL of the tax rules and regulations, can result in big tax headaches, audits and compliance penalties for store owners. Getting taxes wrong in your eCommerce store is not something you can afford to do.

A professional alternative that gives HikaShop store owners correct tax calculation and compliance is the HikaShop / HikaMarket AvaTax Connector certified by Avalara. You pay for the use of the Avalara AvaTax service based on your store transaction volume. In partnership with Avalara, our Joomla plugin to integrate your HikaShop store is free, including free technical support. You can learn more about it here: polishedgeek.com/services/hikashop-ecommerce-tax-automation

Sorry. I didn't mean to imply this was a problem with HikaShop. It is wholly and solely with TaxCloud. I understand the complexities of the US sales tax system but their website indicates they take the complexity out of the system and calculate the correct taxes according to US law. This isn't the case and is misleading as I discovered after several hours of testing. You can't upgrade to get the correct tax figures this is the way their system works. The $10 a month fee is just to remove the states that you don't need to collect for anyway.

To elaborate on Colorado taxes... If you have an online store and your shop or warehouse is in Colorado Springs.

1. If you ship something to an address out of state sales tax is 0%. Tax Cloud returns this correctly except for the extra states they add for you as part of "compliance." :huh:
2. If you ship to Castle Rock (just south of Denver) you only need to collect state sales tax (2.9%) as the address is not in Colorado Springs or El Paso county. TaxCloud returns the full local tax for Castle Rock (7.5%). This is not correct it should be 2.9%. If you also had a store in Castle Rock then you would need to collect 7.5% sales tax (even though you may ship from Colorado Springs) as you have a point of presence there.
3. If you ship to a Colorado Springs address the full local tax needs to be collected (7.63%). TaxCloud returns this correctly.

I hope that clarifies things a little more.

If the taxes amount returned by TaxCloud are not correct, then they should fix it on their end.
But as PolishedGeek pointed out, an alternative exists, so it could be worth looking at it if TaxCloud doesn't work right for you.

To clarify: TaxCloud is NOT responding with the wrong rate. Rather, TaxCloud is responding with the correct tax due under Colorado law.

Period, end of debate.

However, what you are complaining about is the accommodation Colorado allows for local compliance only (ignoring counties outside of a retailer's home county/city). This accommodation is valid under current CO law, but this accommodation is based upon a clearly out-dated belief that keeping track of many jurisdictions would be unduly burdensome (in the words of the 1967 Supreme Court Bella's Hess opinion). jUst because the accommodation is available, it does not change the legal fact that the full sales tax is due - the accommodation merely shifts the burden of compliance from the retailer to the consumer. Colorado even recently enacted modifications to this law to modernize and simplify compliance, which is why TaxCloud now works in Colorado as well (though we have not been certified yet).

With TaxCloud, our situation is absolutely transparent. We are paid by the states to make sales tax compliance as easy as possible for retailers - that is why our service is FREE. Our mission is that no retailer should ever have to pay to comply with sales tax laws - the states should. Given that our ultimate employers are the states themselves, retailers benefit with full indemnification, handling of notices and audit inquiries, and even automated remittance of sales tax proceeds in states that have certified us (more than half of the sales tax states as of this moment - but admittedly not CO yet).

So, if you want to easily comply with sales tax laws, we are your best option. However, if you are intent on exploiting the "undue burden" loophole from from 1967 by refusing to collect sales tax legally due, than TaxCloud will not be a good option.

Not sure where this "simplified approach" attack on TaxCloud is coming from, but it is uninformed (if not intentionally misleading). TaxCloud always responds with sales tax amount due based upon the full street address information provided, never simply by zip codes.

Hi,

Thank you for explaining the situation. Not being familiar with such advanced details of the states of the USA, it's hard for us to say anything useful on that topic as we just implemented the integration.

For almost 50 years Colorado has been operating under the accommodation provided under Colorado law. Do we decide this is an outdated belief or does the Colorado government need to make the decision, remove the accommodation and re-educate consumers? Consumers have no idea this law is an accommodation they know what they expect to be charged when it comes to sales tax.

I can't and won't build websites for clients that will result in one or both of the following.

1. Consumers will abandon the purchase at the shopping cart because they believe they are being scammed when it comes to the sales tax.
2. Disgruntled, possible angry consumers, will call my clients demanding to know what is going on with the sales tax they are being charged.

Either way I will get calls from my clients asking for an explanation and to immediately fix the "error" (I know that is a matter of interpretation between us) that is calculating the sales tax.

At TaxCloud you receive a commission from the states for collecting sales tax. I receive income from the referrals of happy clients. Maybe one day those two things will come together and we will both be happy.

We certainly don't want you or your clients to loose business or customers!

We speak to lots of merchants who are anxious that consumers will think something is fishy if they start collecting sales tax.

In practice, their customers almost never call to complain about sales tax being collected because their customers are not only aware of their own sales tax, they are usually aware of the exact rate they are supposed to be charged (so, it better be the right one).

Well, at least you know how TaxCloud works - our service may be right for some of your clients, and may not be right for others.

We respect that.