LuLaRoe is one of the country’s largest multi-level marketing companies, selling women’s clothing through social media and “pop-up” home parties.
Consultants purchase inventory directly from LuLaRoe, and then sell it through an online platform with the intention of making anywhere between 100% to 110% profit margin on each sale, depending on each product’s markup.
There has been some confusion among both consultants and customers about the LuLaRoe sales tax policy.
In short, consultants are responsible for charging sales tax to their customers in accordance with the tax rate of the state in which the customer lives.
Customers will see the sales tax, if any, added to their total purchase price before approving payment through the LuLaRoe vendor system.
Since the sales tax is added to the amount of the purchase price and charged immediately, it’s not something customers should need to worry about when they’re making a purchase.
LuLaRoe’s Sales Tax Policy
When a consultant sells a product, he or she uses LuLaRoe’s portal site, Audrey, to collect the funds.
When the funds are collected, a small credit card processing fee is charged, as well as a sales tax. The remainder is deposited into the consultant’s checking account after approximately 2 – 3 days of processing time.
While the process may seem simple enough, there has been some confusion as to how a consultant should charge sales tax. Because sales tax is dependent on the state where the customer lives (not on where the consultant lives), it can be cumbersome to research sales tax policy for consultants who have orders coming in from many different states.
For that reason, LuLaRoe uses the Audrey software to conduct its transactions. The software is programmed with sales tax rates for each state.
The final sales tax rate is assessed against the “ship to” address. The consultant will be able to input his or her customer’s information before finalizing payment, and the Audrey system will automatically calculate the appropriate tax.
Sales Tax by State
For reference, in case you’d like to calculate the sales tax ahead of placing an order, below are each state’s sales tax rates for clothing at the time of writing, courtesy of TaxFoundation.org:
- Alabama: 4%
- Alaska: 0%
- Arizona: 5.6%
- Arkansas: 6.5%
- California: 7.25%
- Colorado: 2.9%
- Connecticut: 6.35%
- Delaware: 0%
- Florida: 6%
- Georgia: 4%
- Hawaii: 4%
- Idaho: 6%
- Illinois: 6.25%
- Indiana: 7%
- Iowa: 6%
- Kansas: 6.5%
- Kentucky: 6%
- Louisiana: 5%
- Maine: 5.5%
- Maryland: 6%
- Massachusetts: Exempt from state sales tax (up to $175 per item)
- Michigan: 6%
- Minnesota: Exempt from state sales tax
- Mississippi: 7%
- Missouri: 4.225%
- Montana: 0%
- Nebraska: 5.5%
- Nevada: 6.875%
- New Hampshire: 0%
- New Jersey: Exempt from state sales tax
- New Mexico: 5.125%
- New York: Exempt from state sales tax (up to $110 per item)
- North Carolina: 4.75%
- North Dakota: 5%
- Ohio: 5.75%
- Oklahoma: 4.5%
- Oregon: 0%
- Pennsylvania: Exempt from state sales tax
- Rhode Island: Exempt from state sales tax (up to $250 per item)
- South Carolina: 6%
- South Dakota: 4.5%
- Tennessee: 7%
- Texas: 6.25%
- Utah: 5.95%
- Vermont: Exempt from state sales tax
- Virginia: 5.3%
- Washington: 6.5%
- West Virginia: 6%
- Wisconsin: 5%
- Wyoming: 4%
- District of Columbia: 5.75%
Filing State and Federal Income Taxes as a LuLaRoe Consultant
LuLaRoe sellers typically receive a 1099 form. However, just like with all 1099s, a person must earn at least $600 first.
If consultants don’t receive a 1099, they are still expected to self-report their LuLaRoe income and pay federal income taxes accordingly.
(How much is a consultant’s income, you may ask? Find out in our research on the average income of LuLaRoe consultants.)
Although LuLaRoe doesn’t take income taxes out of consultants’ commission checks, the company does withhold state sales tax on commissions, which it then pays to the state in which the consultant resides.