Internet Sales Tax

[Monty]

Received an email this morning from EBay concerning the proposed legislation for an internet sales tax. If you are against this, please take a minute and look at this page and let your elected officials know.
If you think that this will not affect you, than OK. But if you have a web site selling your pens, that it will because you will need to collect sales tax on all sales in the US.

 

[lyonsacc]

You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).

Wouldn't mind seeing the limit raised to 2 or 3 million. Hopefully they will index the amount for inflation as well. The states would be required (at this point - since the legislation can always get changed) to have electronic payment systems to make the process easier.

 

[sbell111]

You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers.

Of course, many of our vendors will have to collect sales tax on our purchases, so it will quickly become our problem.

 

[sbell111]

Received an email this morning from EBay concerning the proposed legislation for an internet sales tax. If you are against this, please take a minute and look at this page and let your elected officials know.
If you think that this will not affect you, than OK. But if you have a web site selling your pens, that it will because you will need to collect sales tax on all sales in the US.

Your link has too many 'http's, so it doesn't work.

Here is the correct link: linkerooski

 

[lyonsacc]

Of course, many of our vendors will have to collect sales tax on our purchases, so it will quickly become our problem.[/quote]

If you are purchasing your kits/blanks to resell, then you should be able to get an exemption certificate and not be charged sales tax by the vendor (assuming the vendor will be able/willing to handle it).

If you are purchasing kits/blanks for personal use or gifts then you should likely already be paying a sales or "use" tax to your state - although very few people do this.

 

[panamag8or]

I doubt anyone here is selling a million dollars worth of pens per year.

 

[RichB]

Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip. This is totally wrong. I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip. You pay there state tax when you buy something. Am I missing something??

 

[alphageek]

Just a reminder folks.... As a discussion on sales tax, this directly relates to pen making and/or sales.

Beyond that, political discussion is not allowed - please refrain from political commentary.

Dean
Asst Mod

 

[Smitty37]

You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).

Wouldn't mind seeing the limit raised to 2 or 3 million. Hopefully they will index the amount for inflation as well. The states would be required (at this point - since the legislation can always get changed) to have electronic payment systems to make the process easier.

I can see this as causing a lot of heartburn to small internet businesses and being a administrative nightmare to a lot of us. It will really cause problems for businesses who 'border' on the edge of $1,000,000 sales.

It is particularily bad for those of us who live in one of the 'no sales tax' states like Delaware. We would have force on us - collecting sales tax for other states but not the state our business is in.

Amazon favors it because they've found a way to make money off it. They charge a fee for collecting the tax for businesses who sell through Amazon.

Ebay will no doubt start doing something similar to people who sell on eBay. There is no doubt in my mind that most of the US people are opposed to this - their costs will go up.

Those who favor this (as near as I can tell that would only be politicians wanting to get more of your money) are trying to sell it as a way to help "level the playing field" for small box stores but I have not been able to figure out how they will benefit at all - it isn't going to increase traffic to them a bit. Small box stores are not losing business to the internet - many of them already have internet sales themselves or sell products not condusive to internet sales.

 

[lyonsacc]

Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip. This is totally wrong. I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip. You pay there state tax when you buy something. Am I missing something??

Rich - I'll take a stab at answering this. I believe states cannot create laws that would tax activity in other states.

Most current sales/use tax laws can only tax activity within the state. Thus, internet sales to nonresidents are not taxed because the location of the sale takes place outside of the state.

Technically if you go on a trip and buy something in another state (and pay sales tax of 1% on that purchase) and then return to your state (which has a 5% sales tax) you are supposed to pay your state a "use" tax of 4% (the difference between what you paid and what your state charges). Keep in mind this almost never gets paid.

Depending on the state this additional "use" tax is paid either with your income tax or as a separate form.

Yes - it isn't the most sensible thing.

State's generally aren't interested in auditing people for this because the cost would usually far outweigh the benefit.

 

[jj9ball]

I don't know about you guys but I buy most of my equipment online just for that reason. If the boss ever lets me get a better table saw the extra tax could be in the neighborhood of $200 extra (assuming I actully get to spend $3000). It may never affect pen sales for most of us, but for the equipment side of things it certainly does suck.

 

[lyonsacc]

You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).

Wouldn't mind seeing the limit raised to 2 or 3 million. Hopefully they will index the amount for inflation as well. The states would be required (at this point - since the legislation can always get changed) to have electronic payment systems to make the process easier.

I can see this as causing a lot of heartburn to small internet businesses and being a administrative nightmare to a lot of us. It will really cause problems for businesses who 'border' on the edge of $1,000,000 sales.

It is particularily bad for those of us who live in one of the 'no sales tax' states like Delaware. We would have force on us - collecting sales tax for other states but not the state our business is in.

Amazon favors it because they've found a way to make money off it. They charge a fee for collecting the tax for businesses who sell through Amazon.

Ebay will no doubt start doing something similar to people who sell on eBay. There is no doubt in my mind that most of the US people are opposed to this - their costs will go up.

Those who favor this (as near as I can tell that would only be politicians wanting to get more of your money) are trying to sell it as a way to help "level the playing field" for small box stores but I have not been able to figure out how they will benefit at all - it isn't going to increase traffic to them a bit. Small box stores are not losing business to the internet - many of them already have internet sales themselves or sell products not condusive to internet sales.

I agree Smitty - The cost of dealing with collecting the sales tax can burdensome. We have a handful of clients that collect sales tax for multiple states. It can sometimes cost them more in our fees to prepare the sales tax returns (and keep them compliant) than they end up owing that state.

I think a cap of at least $2 or $3 million (indexed for inflation) would be an big improvement.

 

[Smitty37]

Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip. This is totally wrong. I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip. You pay there state tax when you buy something. Am I missing something??

If you go to another state and buy something and have it shipped or delivered in your state - the store making the sale does not have to collect sales tax in most cases. You are usually responsible to pay the 'use' tax in your state. On some major items such as cars, boats, mobile homes and RVs almost all states have things set up so they will collect the tax when you register the title.

On the border between PA and NY it was not uncommon for people to buy most appliances and furniture in the state they didn't live in and have it delivered. The stores were not required to collect their states tax on items delivered to out of state addresses.

Many people don't realize that catalog sales don't have to collect sales tax on sales out of state either.

 

[Russianwolf]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

 

[PaulDoug]

My concern, this is only opening the door. You know government, once they get started with this it will spread, the threshold will be lowered and lowered and more control well be added.

Washington state has sales tax, Oregon does not. When Oregon people come to Washington they are exempt from paying Washington sales tax. They just have to show they are Oregon residents at the cash register. Fact a lot of clerks ask if you are an Oregon resident when they start to ring you up. It always kind of bothered me that Oregon residents could come to our state, use our facilities, roads, parks, etc., and not have to help pay for them, but hey, what do I know.

 

[Smitty37]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

 

[Smitty37]

My concern, this is only opening the door. You know government, once they get started with this it will spread, the threshold will be lowered and lowered and more control well be added.

Washington state has sales tax, Oregon does not. When Oregon people come to Washington they are exempt from paying Washington sales tax. They just have to show they are Oregon residents at the cash register. Fact a lot of clerks ask if you are an Oregon resident when they start to ring you up. It always kind of bothered me that Oregon residents could come to our state, use our facilities, roads, parks, etc., and not have to help pay for them, but hey, what do I know.

Why should that bother you - since they have no sales tax you have that same benefit when you go there.

btw they don't charge Oregon residents the sales tax to eliminate a disadvantage to retailers near the borders where Washington residents can cross the border and buy without paying sales tax. Every year when it is time for folks to be buying school clothes NY State has a "sales tax holiday" in counties that are bordering PA because PA has no sales tax on clothes and NY stores were losing tons of sales at that time of year.

 

[Carl Fisher]

I was pretty certain that I read this will only effect business who do more than $1M in sales per year. I haven't read any deeper but the articles I saw was that they were not trying to burden small business like ours.

 

[Russianwolf]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.

 

[Carl Fisher]

The pain in the rear is the states have different rules for when and how to pay your taxes. I'm on the border of NC and SC. In SC I have to pay my taxes by the 20th of the following month while NC requires a sales and use tax that is submitted once a quarter. It's hard enough to track who I pay, how much, and when for just the 2 states. Plus having to maintain our business registration and tax numbers for both states.

And we have to file a $0 return even if we don't sell anything or else we get a nasty note from the state.

 

[BSea]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.

I doubt it would be illegal under the current system. What state is going to object to getting more tax than they are due? But under the new law (assuming $1,000,000 in sales), you'd have to report tax to each state where you had a sale. So your 6% option won't work for the new law.

My only problem with the new law, is that down the road, the $1,000,000 will probably change to $100,000, then $10,000 until there is no limit. Then it affects all of us. Both buyer, and seller.

 

[Russianwolf]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.

I doubt it would be illegal under the current system. What state is going to object to getting more tax than they are due? But under the new law (assuming $1,000,000 in sales), you'd have to report tax to each state where you had a sale. So your 6% option won't work for the new law.

My only problem with the new law, is that down the road, the $1,000,000 will probably change to $100,000, then $10,000 until there is no limit. Then it affects all of us. Both buyer, and seller.

I would imagine that if it becomes that prevalent that the shopping cart people will integrate it into their systems and you will be able to print the forms as you need them. Each month, press a button and your forms print. You attach a check and mail. Could be as simple as that.

 

[Smitty37]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.

I'm not certain but I think I've read that there is a federal law on the books prohibiting states from collecting their state sales tax on out of state internet sales. Technically, the person buying on the internet owes a "use" tax to their state for internet purchases (albeit that most folks don't pay it) and if they are following the law they are getting taxed twice

I do know that when I made purchases in PA and carried them with me I paid the tax, if I had them delivered to my home in NY I did not pay the tax unless the store where I bought them also had a store in NY in which case they collected the NY tax.

I'll do a little more checking on that to be certain, you could be right.

 

[avbill]

beside the sales tax people there is a small paragraph adding a national sales tax !

 

[Russianwolf]

beside the sales tax people there is a small paragraph adding a national sales tax !

Proof?

And I mean a link to the bill that says that.

 

[Smitty37]

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.

Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?

I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.

I doubt it would be illegal under the current system. What state is going to object to getting more tax than they are due? But under the new law (assuming $1,000,000 in sales), you'd have to report tax to each state where you had a sale. So your 6% option won't work for the new law.

My only problem with the new law, is that down the road, the $1,000,000 will probably change to $100,000, then $10,000 until there is no limit. Then it affects all of us. Both buyer, and seller.

I think it would be a nightmare....for instance NY State allows counties and cdrtain cities to have a sales tax as well as the state...so you would have to know the county or city where the delivery was going to collect the proper tax. Most states I've been involved with it's not a simple matter of paying on gross sales because different states exempt different items...most clothing, for instance, is exempt in PA but not NY or NJ. Most but not all food items are exempt when bought at the grocery store and some items exempt in one state are not exempt in another. So we would not only have to know what the tax is for every jurisdiction but also what items are exempt.

Two of the five states which don't have a state sales tax allow localities and counties to have them. Many small internet businesses will be forced to either get smaller (what a great thing that would be) or close their doors.

Also impacted, and overlooked in the discussions I've seen are the many small box stores who also sell on the internet...there goes their access to out of state buyers (who buy to avoid in state sales tax) who augment their local sales.

This is not a trivial thing they are talking about doing.

 

[lyonsacc]

Not sure how they will resolve the issue that each state, for the most part, has different rules as to what is subject to sales tax. Will be interesting to watch (Give me some slack, I'm an accountant so these things can get interesting).

Not related to pen turning, but in some states black coffee is not sales taxed but coffee with sugar is taxed (the logic being that is that drinks with sugar added are more for pleasure and not needed for nutritional intake and drinks without sugar are in the usual nutritional diet). Sorry - but I don't remember what state that is in.

Is your morning coffee taxed? I'm a tea drinker . . .

 

[Russianwolf]

Here's the proposed bill. http://www.gpo.gov/fdsys/pkg/BILLS-113s743pcs/pdf/BILLS-113s743pcs.pdf

One thing I find interesting and may be calming to others. To participate the states have to simplify their sale/use tax code.

There will be one jurisdiction in the state and local codes don't apply. So no City or County add on tax as was mentioned earlier.

Also they must give you:

(ii) software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)

The bill is only 5 pages, so have a read through. And No, there is no provision for a Federal Sales Tax mentioned as far ass I can see.

 

[ed4copies]

Interesting reading.

Wonder who these "software providers" will be and what will be their motivation to provide you "complying software at no charge".

I see no provision for "exempt" transactions (like for resale).

 

[Smitty37]

Here's the proposed bill. http://www.gpo.gov/fdsys/pkg/BILLS-113s743pcs/pdf/BILLS-113s743pcs.pdf

One thing I find interesting and may be calming to others. To participate the states have to simplify their sale/use tax code.

There will be one jurisdiction in the state and local codes don't apply. So no City or County add on tax as was mentioned earlier.

Also they must give you:

(ii) software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)

The bill is only 5 pages, so have a read through. And No, there is no provision for a Federal Sales Tax mentioned as far ass I can see.

Without seeing the bill as proposed (it is subject to change as neither house has passed it yet) I'd agree that it won't add a federal sales tax - that would be doa in the house of representatives right now.

I've read that it also omits compensation for non resident businesses acting as the states tax collector as it now stands. Free software doesn't pay for the businesses time, effort and accounting expense to comply.

 

[Chasper]

We collect and remit sales tax in 14 states where we attend shows. Visiting a state for the purpose of selling merchandise which is delivered at the point of sale, has been long established as pseudo nexus, i.e., sales tax must be collected and remitted. However, it does not amount to true nexus and therefore is not subject to state income or property tax on the earnings or inventory.

Selling online through our own web site adds a significant complication. Since we have a presence in the state by virtue of attending a show in that state, then we are required to collect and remit sales tax on internet sales, no matter how small the amount. For that reason we don't solicit online sales direct, but we do ship the orders and pay the tax when they occur.

Pain in the A$$? Yes, absolutely.
Fair? Yes, also absolutely.

If you are going to do business in any state, then you should be required to play by the rules of that state, without an unfair advantage over local merchants. I spent most of the last 45 years working for catalogs and online businesses, we always legally avoided state and local sales taxes in many states. It has been a sweet deal, but that doesn't make it right. I support sales tax on internet sales and any other type of direct sales that occur across state borders.

 

[Smitty37]

Interesting reading.

Wonder who these "software providers" will be and what will be their motivation to provide you "complying software at no charge".

I see no provision for "exempt" transactions (like for resale).

I think the complying providers refers to shopping carts and their software is generally not free.

Probably you would have to be able to recognize the exemption numbers issued by the states for the 'resale' or exempted use provisions. Which also differ in each state.

It will be a nightmare if enacted....and as someone else pointed out many people will have to spend more to file the returns than they collect for the state. The 1,000,000 (or whatever they settle on) should have a 2nd tier of maybe 100,000 or 200,000 within a state to apply.

 

[Kretzky]

Already happens here in Canada.
Up to about 4 years ago in BC & Ontario we had two taxes Federal (GST-5%) & Provincial (PST-7%) that rate varied from Prov. to Province, when I bought something online from from (say) Ontario & had it shipped to BC. I only had to pay the Federal (GST) part of Tax. (item being shipped out of Province) I also only paid Fed GST on the shipping.
Soon after the last Provincial election the BC & Ontario Provincial gov'ts decided to combine these two taxes & call it Harmonised sales Tax (HST-12%) a "value added tax".
BC residents protested; a referendum was held & HST was finally repealed & replaced with the old GST/PST (5%/ 7%) taxes again. In Ontario however they stayed with HST.
But, if I now buy from an Ontario supplier I still get charged their HST, (ie Federal & Provincial Taxes which are 5% & 8%) I'm also charged their HST on the postage/ shipping/ handling fees.

 

[PR_Princess]

If memory servers, a similar US internet sales tax law last year was attempted last year - but it failed because the threshold for exemption was half a million in sales. This year it was raised one million on the bill. (I believe the IRS defines a small business cap at like $20 million...but I could be wrong!) Thus I would not expect that this sales tax exemption threshold to stay in place for long. Should this pass (which it looks like it will do) be prepared no matter what amount you sell on line.

Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had a sale in those states or not. I expect that this number will also grow as time goes on.

This new tax software will need to be integrated (seamlessly?) into whatever of the dozens of different types shopping carts you may use. And, I do not expect that software firms will keeping doing this free forever. An additional fee of $1.50 per transaction is being bandied about now. This would be in addition to the higher cost of CC fees that most small internet sellers already pay over B&M stores. For the small independent mom and pop on line store, these costs will have to be reflected somewhere (BTW - not so much for Amazon). And that means higher costs to you.

As an additional aside, I have read a couple of retailer blog/discussions groups on this topic recently. Many firms are posting that would be currently over the $1 million threshold (this does NOT include Exotics BTW!!). Many are stating that they will either cut their business or close their locations in the US ( ie firing their US employees), and moving their business off shore. Their primary concern seems to be not with the tax per se, but with headache implementing it and with the cross boarder power it gives 40+ states. (Make no mistake, as a seller if there is a mistake YOU are responsible.)

Paraphrasing one on line retailer of luxury watches.."I have no desire to deal with 40 state auditors at my door one day should the add on tax software have a glitch." He stated he plans to let all of his US employees go and move his multi million dollar on line business from Miami to the Cayman Islands.

 

[Scruffy]

People who line in a state..

at least have the opportunity to vote for/against those wanting to have a sales tax. Those who do not live in that state have no such opportunities. If you want to buy something from a state where tax will be charged and do not like the total price, I guess the best thing to do is not buy it.

Look some where else where the price is acceptable.

 

[alphageek]

at least have the opportunity to vote for/against those wanting to have a sales tax. Those who do not live in that state have no such opportunities. If you want to buy something from a state where tax will be charged and do not like the total price, I guess the best thing to do is not buy it.

Look some where else where the price is acceptable.

I think you are reading it wrong. The idea is that tax will be collected and turned in if you make a purchase over the internet based on the tax rate that the purchase is delivered to. Ie you will pay the same amount of tax on a internet order as the amount of state tax you would pay if you bought it locally.

In short, this extends the existing laws to internet retailers that don't have a presence in a state. Any that already have a presence in the state have to collect this even if ordered via the internet today.

 

[ed4copies]

Just as a "point of information": This bill would NOT apply to Exotics---we are too small. So, it would provide us with a competitive advantage over Penn State, CSUSA, Berea and, probably Arizona Silhouette, and even Ernie.

In spite of all that, we still oppose making it more difficult for "small" businesses to operate. And I certainly see logical reasons for those affected to flee the USA.

Just amazing how they can legislate, completely ignoring the "unintended consequences"!!

 

[Smitty37]

If memory servers, a similar US internet sales tax law last year was attempted last year - but it failed because the threshold for exemption was half a million in sales. This year it was raised one million on the bill (I believe the IRS defines a small business cap at like $20 million...but I could be wrong!). Thus I would not expect that any sales tax exemption threshold to stay for long. So should this pass (which it looks like it will do) be prepared no matter what amount you sell on line.

Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had in those sale in those states or not. I also expect that this number will also grow as time goes on.

This new tax software will need to be integrated (seamlessly?) into whatever of the dozens of different types shopping carts you may use. And, I do not expect that software firms will keeping doing this free forever. An additional fee of $1.50 per transaction are being bandied about now. This would be in addition to the higher cost of CC fees that most small internet sellers already pay over B&M stores. For the small independent mom and pop on line store, these costs will have to be reflected somewhere (BTW - not so much for Amazon), And that means higher costs to you.

As an additional aside, I have read a couple of retailer blog/discussions groups on this topic recently. Many firms are posting that would be currently over the $1 million threshold (this does NOT include Exotics BTW!!). Many are stating that they will either cut their business or close their locations in the US ( ie firing their US employees) moving their business off shore. Their primary concern seems to be not with the tax per se, but with headache implementing it and with the cross boarder power it gives 40 states. (Make no mistake, as a seller if there is a mistake YOU are responsible)

Paraphrasing one on line retailer of luxury watches.."I have no desire to deal with 40 state auditors at my door one day should the add on tax software have a glitch." He stated he plans to let all of his US employees go and move his multi million dollar on line business from Miami to the Cayman Islands.

I would also note that it is not difficult today to have a business located in the Cayman Islands without you being there. It will also be completely possible to have the business in the Caymans and do the shipping from the USA. Hence the sale is completed off shore, but the shipping is from a "warehouse" located in say Delaware. Goods are ordered from suppliers by someone in the Caymans and delivered to their warehouse(which they do not own or lease) and shipped to their customers from there. UPS and others already offer this service your stock can be held in their warehouse and they will pack and ship all of your orders....You wouldn't have to collect the tax because you're a foreign corporation with no business place in the USA and UPS would not have to collect the tax because the point of sale is where the money is collected and they didn't collect the money.

 

[Smitty37]

We collect and remit sales tax in 14 states where we attend shows. Visiting a state for the purpose of selling merchandise which is delivered at the point of sale, has been long established as pseudo nexus, i.e., sales tax must be collected and remitted. However, it does not amount to true nexus and therefore is not subject to state income or property tax on the earnings or inventory.

Selling online through our own web site adds a significant complication. Since we have a presence in the state by virtue of attending a show in that state, then we are required to collect and remit sales tax on internet sales, no matter how small the amount. For that reason we don't solicit online sales direct, but we do ship the orders and pay the tax when they occur.

Pain in the A$$? Yes, absolutely.
Fair? Yes, also absolutely.

If you are going to do business in any state, then you should be required to play by the rules of that state, without an unfair advantage over local merchants. I spent most of the last 45 years working for catalogs and online businesses, we always legally avoided state and local sales taxes in many states. It has been a sweet deal, but that doesn't make it right. I support sales tax on internet sales and any other type of direct sales that occur across state borders.

This is different from internet sales...your point of sale is in that state and if they collect sales taxes from local sellers sales at those shows it is fair that they collect them from your sales also.

With Internet sales the point of sale is in your home state. Sellers in the other states delivering to your state don't have to collect tax on their sales to residents of your state so the current system is fair.

What we are talking about is making me responsible for collecting taxes in the state of Hawaii, 5000 or so miles away and where I've never been in my life. I think Hawaii should find a better way to make their citizens obey their tax laws.

 

[ed4copies]

I would expect more creativity from you, Smitty!!

COLLECT the tax for Hawaii!! Over a year or so, that might amount to $20-$50!!!!

THEN, schedule a trip TO Hawaii. Make sure to list the PURPOSE of your trip to deliver the money you owe them!!

Now, your $5000 trip should be TAX DEDUCTIBLE business expense!! You save at least a grand in income tax!!