Sales Tax E Commerce And Small Business

Sales Tax E Commerce And Small Business



If an​ online business has a​ physical location in​ a​ certain state,​ such as​ a​ store,​ business office,​ or​ warehouse,​ it​ must collect sales tax from customers in​ that state. if​ a​ business does not have a​ physical presence in​ a​ state,​ it​ is​ not required to​ collect sales tax for sales into that state. This rule originated from a​ 1992 Supreme Court decision which declared that mail-order merchants did not need to​ collect sales taxes for sales into states where they did not have a​ physical presence.

Online shoppers who live in​ a​ state that collects sales tax are officially required to​ pay the​ tax to​ the​ state even when an​ Internet retailer does not collect it. When shoppers are required to​ pay tax directly to​ the​ state,​ it​ is​ referred to​ as​ "use" tax instead of​ sales tax.

The revenue collection agencies in​ most states now have some kind of​ formal position on​ e-commerce sales. Most states treat the​ sales in​ the​ same way they treat mail-order sales; however,​ you​ should contact your state tax agency and ask for help and information with regard to​ your particular business to​ be sure.

State governments and brick-and-mortar retailers are in​ the​ hunt for legislation to​ overturn the​ 1992 Supreme Court ruling. Missing out on​ tax revenue from online purchases is​ maddening for state governments,​ so expect changes in​ the​ future.

Practical example: Suzie found the​ perfect birthday present for her husband but can't find them in​ California,​ so she orders the​ gift online from a​ gift shop with headquarters in​ Texas. the​ supplier has all of​ its facilities in​ Texas and collects payment in​ Texas. Suzie does not have to​ pay California sales tax (or Texas sales tax) on​ the​ gift.

A few months later,​ the​ online business opens a​ warehouse in​ California to​ handle its online orders for the​ entire country. Suzie continues to​ order gifts from the​ same company in​ Texas but she must now pay California sales tax.

Should Internet commerce remain exempt from sales taxes to​ encourage the​ growth of​ online business or​ should it​ be subject to​ the​ same taxation faced by storefront companies is​ not our place to​ decide,​ but it​ is​ a​ concern for all selling and buying online.




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