|Wed Aug 16 2017 20:43:30|
Lawmakers Seek Taxes from Small Online Sellers
By: Ina Steiner
States are seeking various ways to get online retailers to collect use tax that their residents should be reporting and paying. One state is going after Amazon to collect its sales tax on behalf of its merchants.
South Carolina filed a complaint against Amazon in June for allegedly failing to collect taxes on sales made by its third-party merchants, according to CNBC
. "Amazon maintains that the seller is responsible for determining if sales tax is required and for collecting and remitting it. South Carolina is fighting that premise, arguing that under state law, Amazon is considered the seller because the company controls a large part of the sales process for its third-party merchants."
Some of the issues involved - how would Amazon determine for which sellers it should collect the state's tax, and does that open them up to liability?
How would a multi-channel seller file and remit taxes for all transactions when some are being remitted on their behalf by the venues on which they sell? (And how do they keep track of it all?)
If South Carolina succeeds, no doubt other states would want in on the action, further complicating matters for all concerned.
Meanwhile, Senator John Thune wants to greatly expand the existing requirement that payment processors report transactions on Form 1099-K. Currently payment processors such as Amazon, PayPal, Google, and credit card processors are required to submit the 1099-K forms to the IRS for sellers with more than $20,000 in annual sales and more than 200 transactions in a year.
According to Bloomberg
, the Senator wants to lower that threshold from $20,000 to $1,000. Along with that comes the necessity of collecting social security numbers - how many people selling a low-dollar value online have a Tax ID number? Requiring the most casual of sellers to hand over their social security numbers to ecommerce companies doesn't sound like the most cyber-secure practice. It sounds like a lot of trouble for $1,000 earned over the course of a year.