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Mon June 20 2011 21:45:51

Online Sales Tax Is Coming - How Will It Affect You?

By: Ina Steiner

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Right now, many merchants collect sales tax in the state(s) in which they reside and operate their business, including where they warehouse their goods (Amazon FBA and other fulfillment houses included).

But what would you do if you had to collect sales tax for every jurisdiction in the country on your eBay, Amazon.com, Etsy and storefront sales, and had to keep records and file periodic reports with all of those tax agencies?

The Associated Press published an article over the weekend about the online sales-tax battle which has been heating up for the last 2 years. Large retail chains are lobbying Congress through its Alliance for Main Street Fairness organization, which says on its website, "We are working to close the anti-small business online sales tax loophole."

Currently merchants must collect sales tax only in states in which they have a presence thanks to a 1992 Supreme Court ruling - but large retail chains with stores in many or all states say this isn't fair to them and point to Amazon.com and Overstock, which don't have to collect sales tax in the states in which they have no warehouse or office space.

Amazon says it would support legislation at the federal level that would streamline and simplify tax collection. It's also working with states like South Carolina and Texas to get exemptions from collecting sales tax in exchange for creating a minimum number of jobs in the state. (See "Amazon negotiating for sales-tax exemption in trade for 5,000 new Texas jobs," - link to article.)

It seems inevitable that more states will join the online sales tax bandwagon, and there's a good chance federal legislation may come sooner or later. We'd like to know if and how online sales taxes affect your behavior, as a buyer and as a seller.

Would you reduce your buying activity on marketplaces like eBay and Amazon.com if you had to pay sales tax on your purchases? Would you instead buy more from brick-and-mortar retailers in your area?

As a seller, how would having to collect sales tax affect your business?

We'll tally your responses in this quick online survey, and feel free to leave your comments below on any aspects of the online sales tax debate.




Comments (45) | Permalink

Readers Comments

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: buck efay

Mon Jun 20 23:02:35 2011

If the states are smart (and they are) this will be collected by the merchant of record, which means Amazon, Ebay et al. They will be responsible for being in compliance & collecting & paying the tax for you. Neither site allows you to collect the tax & it is illegal to roll in the tax so I see a big headache & lawsuits coming for both from sellers if they expect us to eat these fees, which they will not collect for us or (allow us to collect without a FEE) as they are legally obligated to do. Independent sites will have a headache & I'm not looking forward to it.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: CutTheCrap

Mon Jun 20 23:22:53 2011

I have absolutely no problem paying sales tax on the web as a buyer and frequently buy from online stores like Joann.com, BestBuy, Walmart etc. that include sales tax on every purchase.

However it is not reasonable or even feasible to expect a small online seller to collect and report taxes to all 50 states. In addition in some states, local sales taxes also apply and those local tax rates can vary widely within a particular state.

A small seller could not possibly afford to collect and report a myriad of different taxes without exhaustive effort and without going under.

Now if there was a Central Tax Authority for all states AND if tax rates across all states were equal for online purchases AND if the seller just needed to report the state and tax collected to a single body then it could be feasible and affordable.

The individual 50 states could band together to create a Central Tax Authority which would be responsible for forwarding the collected sales tax to the appropriate state(s). This would benefit even the brick & mortar stores that have an online presence.

The key to collecting tax from online sales is simplicity and ease of use. Right now the tax codes across the USA, along with the reporting requirements are anything but simple.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Smitty This user has validated their user name.

Mon Jun 20 23:44:09 2011

Ina

''As a seller, how would having to collect sales tax affect your business?''

I'm sure that ''collecting'' sales tax would help my bottom line.

Smitty

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: leslie

Tue Jun 21 00:20:09 2011

I'd stop selling online.  The record keeping would take more time than it would be worth. As it is, I pay my state sales tax out of my pocket, because collecting it is too much of a hassle.  
I can see it now
Maryland  47 cents
Wisconsin  .83 cents.
Texas 1.49
etc etc.
450 pounds of paperwork monthly, quarterly or annually for a tax liability of around $150 /year

Not me

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Lawrence A Dickerson

Tue Jun 21 00:59:42 2011

It is only fair that all sales venues collect and disperse those taxes.All mom and pop brick and mortar stores are required to adhere to all of the laws of all jurisdictions.Part of th cost of doing business is the sweat behind the administrative aspects.

If those paper trails are maintained diligently the time needed is minimal but it has to be a priority.Too many smaller businesses pocket the city,county,state and federal taxes hoping to make it big,'next month' to compensate and that hardly ever occurs.

The worst part and the most time consuming is the start up requirements.I would suggest that all sellers begin the research into the administrative requirements.Learn to  establish an inventory of goods and start tracking the costs involved in order to measure  a true net profit.Set up a  quasi tax system to keep track of how it is to be accomplished.When the time comes and that time is very near,all one has to do is play for real.This practice run will also tell the small business owner if they are capable of actually do what is required.No small business person can truly afford an accountant so start early and in Ernest.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

This user has validated their user name. by: Ric

Tue Jun 21 01:30:53 2011

What would the law look like?

There is little wonder this can of worms has been avoided for so long now.

No matter how tax law is written, implementation of a sales tax might just be the end of small sellers engaging in ecommerce.

Will individual sellers have to collect sales tax based on the tax rates of the state where the buyer lives or where the item was shipped from?

Would a federal law require sales taxes be collected and paid to both ends of a transaction?

What happens if a seller in one state sells items through a drop shipper located in a second state and the order is shipped to the buyer located in a third state, is the transaction potentially subject to sales tax for three jurisdictions?

What about individual sellers who sell on multiple websites? Might they have to remit separate payments based on each venue to every individual state they sell to? The same question applies to sellers who might have multiple selling ID's on a single web site.

Who collects and remits the taxes, hundreds of thousands of small sellers or the significantly smaller number of venues? If the venue, what about classified web sites such as Craigs List where the transaction is conducted directly from seller to buyer with no involvement by the venue?

Imagine the thousands of sellers that have opened up their own web site to sell goods, and the nightmare complying with each individual state tax requirements... what is taxable is one state may not be taxable in another, keeping up with changing tax law will likely destroy ecommerce as we know it.

Speaking of keeping up with new and changing state tax codes... How would states notify hundreds of thousands of individual sellers when tax rates change or when taxable merchandise changes? Could states afford the expense such notifications would involve?

Imposition of sales taxes across state borders would likely put an end to most small sellers who started their own web sites or push them back to venues like eBay - Amazon to avoid the nightmare of individual compliance.

What would happen to the smaller specialty venues who do not have the personnel it would take to comply with tax regulations across multiple states? How many might close down rather than add staff to administer and comply with tax laws.

When a US resident purchases from a Canadian seller, what are the tax implications? If taxes based on destination are due, how will states be assured of receiving the revenue due if the seller lives and ships from outside the US? Can a US state enforce it's tax code across foreign borders?

Imagine the additional expenses states would incur with compliance audits... could states afford to  send auditors to 49 other states to audit hundreds of thousands of seller accounts to assure compliance?

Imagine the tax bureau in each state inundated with tens of thousands of checks, each for a very small amount. At the end of the day, costs related to processing payments and tax returns will likely wipe out any additional revenue received.

What about fairness with regard to sellers in states that do not have any sales taxes versus sellers in states that do require taxes be collected?

The logical approach would be to declare the venue responsible for collecting, reporting and remitting sales taxes. That takes care of some but not all of the logistics.

How to resolve the myriad of other issues would likely require legislation on the Federal level in the form of a uniform internet sales tax which might over ride state sales tax laws.

States may see this as a revenue source until they take a closer look at the costs involved. This would not be the first time politicians enacted a tax that ended up costing more to collect than the revenue received.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

This user has validated their user name. by: Marie

Tue Jun 21 02:14:34 2011

buck efay stated above that you can't collect sales tax on Ebay, this is not correct.  If you set it up in your site preferences and in your listings, you can collect sales tax.

Now this is not to say I agree with this country wide sales tax, I'm just commenting on the fact that someone stated you couldn't collect in on Ebay.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Red Ink Diary This user has validated their user name.
Web Site

Tue Jun 21 02:56:20 2011

Lawrence, I don't know if you have noticed but life is not fair and commerce is not based on fairness.

Marie is correct.

Ric said it all, almost, great post.

There is also the question of exactly what is taxable as this varies from state to state. Some charge on grocery items, services, childrens' clothing, shipping charges, others do not.

If Craigslist becomes taxable then newspaper classifieds should also be taxable. I don't see it happening as the system is currently structured.

I will worry about it when it happens.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Sales Rep

Tue Jun 21 03:49:33 2011

  As a seasoned sales professional with over 30 years retail sales experience, I see this as very bad news. I started with a brick and mortar business in 1980, switched to ebay in 2000 then e-commerce with our own website in 2010. Over the years, local, state and federal mandated fee's and taxes have driven us deeper into reducing our costs.

After 30 years of cutting costs to stay competitive in a marketplace dominated by large corporations, I can honestly say I would fold up shop and adjust my lifestyle once more.
Although we provide a “fill” for product which is not available through mainstream sources, I will just throw in the towel as I refuse to be forced into adapting to one more mandated fee or tax.

After a number of years of forced changes selling on ebay, our tolerance has become rather short. With  escalating corporate and bureaucratic greed/needs, mis-use of tax payer funds, I can honestly say I will  shut down retail operations and go underground. If saddled with a nationwide tax collection burden, I see no reason to continue, things are bad enough as is.

I realize every state is trying to collect more revenue but this is going to be yet one more blow to a struggling economy. As a result, one more avalanche of good US quality products will be be lost forever.

Over the last 50 years, too much American product has become scarce. Adding national taxes will kill off even more of those who are holding on to their product lines with hopes things will get better. This means more junk will “attempt” to replace it which usually ends up with zero availability of certain products and tons of the same “pop” crap everywhere, nothing unique or diverse. As the bureaucrats try to create more revenue, they end up killing off more American branded merchandise, jobs and history and with the increased costs of monitoring such taxes coupled with decrease of unique specialized merchandise, how much (if any) will be gained?

Bottom line? Further deterioration of what once made the US great.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Tony DeLuca

Tue Jun 21 05:10:00 2011

Two thoughts:

1) Would the Chinese junk sellers on eBay the ones PayPal keep pushing have to collect and remit sales tax for sales made to Americans?

2) I thought I read somewhere that if a sales tax collection law does get passed, small businesses beneath a certain threshold would be exempt (I thought the threshold was fairly generous -- something like 5 million a year gross). Anyone else read about an exemption?

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Moonwishes
Web Site

Tue Jun 21 05:10:50 2011

Currently most of what we sell is not taxable in our state, but that doesn't mean it isn't taxable in all states. So having to know and collect taxes for all states and the paperwork work involved would be onerous. As a small seller the bookkeeping demands alone would put a crimp in our business to the extent that Uncle Sam won't be getting what he would have because we wouldn't be selling as much because most of our listing time would be involved with listing. We are basically a one person operation that is as fairly successful as a one person operation can be, yet trying to keep up with the sales taxes of all states and localities would be the death of us.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Tony DeLuca

Tue Jun 21 05:27:22 2011

OK -- I just answered my own question. According to the information I found here, $5 million dollars in sales a year was the exemption level I heard about: http://www.newrules.org/retail/rules/internet-sales-tax-fairness/main-
street-fairness-act


If a sales tax collection law WAS passed and IF small businesses were truly exempt, I would imagine that most posters here on AB wouldn't be affected. Actually, such a law and exemption could benefit small sellers -- Amazon and other big retailers would have to collect sales tax and small businesses wouldn't.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: anyone out there

Tue Jun 21 06:29:32 2011

I already collect it in the state I live. My accountant does the paperwork. I pay her.

If I had to collect taxes in all the states it would be her problem not mind as that is what she is paid for.

If I was a hobby seller it still shouldn't be a problem. Thats just part of the problem.

For those who don't so it WELL eventually the IRS will help you.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Y.D.D.D

Tue Jun 21 07:42:45 2011

I am a seller, and have no problem as long as it is SIMPLE !

How about a flat 5% Internet Tax across the board ?

Every state when purchasing on the internet pays one 5% tax

These people are so dense that try to figure ways to make it simple

Only way to make it simple, or part of the way to make it simple is make it the same amount across the board for internet purchases only 5% for example

Now figure out a way for each seller to send the same amount at the end of a fiscal quarter to each state, OR better yet, let eBay or some other simple center be able to receive the flat rate internet tax from each seller for each state customers were in

I will tell you this people, unless they make the internet sales tax a flat rate across ALL states, it will really be a nightmarish complicated not worth headache, more bad news for the small guy

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Quicksilver Messenger This user has validated their user name.
Web Site

Tue Jun 21 08:11:29 2011

I already collect state sales tax. I make it a habit not to buy on eBay because I can't stand the place. I only use their free listings now and got rid of the store a few months ago.

The less I deal with the draconian, small seller hating eBay, the better. I look everywhere else before I even consider purchasing on eBay. I would probably buy local if the price is right and the distance wasn't too far due to high gas prices.

I would still shop Amazon due to their low prices and free super saver shipping. Shopping Amazon just makes sense with savings on local delivery charges.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

This user has validated their user name. by: Tula

Tue Jun 21 08:45:58 2011

@CutTheCrap and @Y.D.D.D make very good points. If there is a way to make the tax collection simple and easy, rather than the 8000 separate tax jurisdictions and their associated reporting that exists now, then that would be fine. Otherwise, we little guys would have a truly onerous burden.

Yes, there are services that will handle it for you, but having to rely on a third party is not something I want to do in my business. Do you trust them to be available all the time? or have good web performance? I personally don't want anyone else getting between me and my customers. If the service is free, how are they making money? Advertising on your web site? Selling data about your business and customers?

Note, these arguments are related to selling on your own web site, not through a venue like eBay or Amazon, but they could still be valid for those sites, as well, depending upon how they would implement sales tax collection.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

This user has validated their user name. by: Tula

Tue Jun 21 08:47:08 2011

Also... Lawrence A. Dickerson obviously has never run a business or he would understand why this is an issue for small online businesses.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: ehome

Tue Jun 21 08:54:21 2011

Come on, people. What about the fact that Govt. will only stop sucking us dry when we stop letting them!

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: anyone out there

Tue Jun 21 09:19:25 2011

@ehome

Until the American voters start voting with their brains the government will continue the sucking sound.

Most people vote because they like what they here and then complain that the loser they voted for lied.

Online Sales Tax Is Coming - How Will It Affect You?   Online Sales Tax Is Coming - How Will It Affect You?

by: Tired of eBay's Bullsh*t This user has validated their user name.

Tue Jun 21 09:25:45 2011

I hope they keep the 'net free from additional sales taxes, at least for small sellers, say, something like sellers that ship less than $1 million annually.

I currently collect sales tax on sales to my home state; I forward that payment quarterly to my state gov. I do the paperwork and filing myself ... not too complicated, but I'd sure hate to have to do it 20 to 50 times each quarter.

If we gotta have (in effect) a "national sales" tax to help fund the bailouts of JP Morgan Chase, Bank of America, and the other Wall Street Crooks, I hope that it is simple, as follows...

Let me file once, quarterly, with the federal gov, and have the feds forward teh money to each state. Which, in my case, would be something like...

$1.20 to NY
$4.40 to CA
$3.60 to FL
etc

Anything else is a NIGHTMARE. 50 states to file separately would be a major major headache, not to mention the hundreds more tax jurisdictions.

And, likely, with every little hamlets tax-base shrunk in the current recession, I can see it now ... Special 8% sales tax for East Podunk Wisconsin (pop. 212) for new snow removal equipment.

Then again, we could just SKIP the whole sales tax and VAT thing, and get all the mega-corps to actually pay their taxes (no more Ireland/Caymans shell game BS, as they do now.

- Tired of eBay's Bullsh*t

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