Selling Online? Are You Collecting Sales Tax Correctly?
By: Lindsay Sisk
Have you heard? Amazon decided to start collecting Sales Tax in all 45 states. If you’re an online retailer you may wonder how this affects you. Why did they make the change? Do you have to start collecting sales tax too? As a consumer, you’re most likely cringing you are no longer getting that 5%-10% discount (torture, am I right?).
As of right now, for sellers it has little impact on your business. Currently, most retailer’s that do not have a physical presence in a jurisdiction are not responsible for collecting sales tax on items shipped there. Sellers are only responsible for collecting sales tax where they have nexus. For those who are not in the SALT world (State and Local Tax for my non-sales tax readers), nexus is a funny word that people say which really means if you are obligated to collect sales tax.
Typically, if you have never step foot in a jurisdiction, or anyone who works for you or on behalf of you, has never step foot in a jurisdiction, you are not required to collect sales tax on items that you ship there. However, once that changes, each state has its own complicated and fun set of rules to make you register. This ranges from actively marketing, to generating an economic impact, to having made 7 sales in one year, thus it no longer being a random sale. The best part is, there is no set rule for every state.
As a consumer, this means you’ll be paying a higher amount each time you click that “Buy Now” button. However, most consumers are unaware that you are responsible for remitting sales tax on items you’ve purchased sales tax free to the state when filing your income tax return. Don’t you love it when your tax preparer asks, “Do you have any items to declare that you purchased tax free this year?” and you’re looking around trying to figure out what answer you’ll give.
Jurisdictions are putting the pressure on sellers because in all reality most consumers say no, they don’t keep track, or had no idea that they were supposed to. By putting pressure on the sellers to collect sales tax on these purchases allows for increased revenue for the jurisdictions, which have decreased with online shopping popularity.
From a compliance prospective, how does this impact your businesses ability to minimize the risks associated with failure to collect and remit correctly? That’s where we come in! Please see our pages below for contact information to get a free consultation. We are here to help with all your sales tax needs.
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