Sales Tax Coming Are You Ready

If not I suggest you get started

[bwnbwn]

This will be here if not this year I am certain 2014. I strongly urge all ecommerce people to get the programming in place. We have discussed this many times but it just seems to be just that a discussion. Get ready it is here.
[foxnews.com...]

[Leosghost]

The subject is also, ( presumably ? because bwnbwn neglected to supply any quotes, so that we might know the subject at "Faux", the "on hover" of the link is not precise , it does not "name" the legislation either ) covered on elreg..

The US Senate is set to vote on the Marketplace Fairness Act (MFA) on Monday, legislation that would force internet retailers to collect state and local sales taxes while giving overseas online sellers a financial leg-up.

[theregister.co.uk...]

[edited by: incrediBILL at 6:41 pm (utc) on Apr 23, 2013]
[edit reason] OT politics [/edit]

[piatkow]

all ecommerce people

I don't think so, to paraphrase part of the original text of the thirty seventh Article of Religion

The United States Senate hath no authority in this Realm of England.

The whole mess is something that should be kept in front of our legislators however as a warning against devolving tax raising powers.

[jwolthuis]

all ecommerce people

Under the bill, businesses with less than $1 million a year in online sales would be exempt.

[lorax]

The bill (PDF): [enzi.senate.gov...]

[votrechien]

Few really object to this proposal, it's how they're implementing it. Do they really expect a small business doing $1m to register and report to 50 different tax agencies? Not to mention, there's something like 20,000 different taxable jurisdictions in the U.S.. Plus, how do you guard against each state being able to potentially audit any company it chooses? If there's a 1% audit rate, that means you're getting audited every other year, guaranteed.

This should really be implemented as a flat internet tax remitted federally and the government can figure out how they divy it out to the states. At the very least, this whole garbage how some states allow sales tax to be assessed at the municipal level has to be canned.

[bwnbwn]

Here is the bill that is being sent through.
[marketplacefairness.org...] I see it has been posted this is easier to read and the website was built for explaining the bill. I said all because once this goes through it is just a matter of the bill being edited to reduce the amount.

[dpd1]

My state doesn't even have the money to administrate and police it's own businesses, but it's going to come up with the manpower to handle thousands of web businesses from all over the country? Ridiculous. I don't see how this could happen.

[incrediBILL]

States won't need to police websites because your competitors in compliance will report you to the State, your suppliers, etc. in an effort to shut your site down.

There are services out there, or were if they survived, that have an API that you call and it gives you exact sales tax including State, County and City taxes thus eliminating all the nonsense required and I find their fees a pittance over having to maintain that crud myself. Not to mention the fact that taxes always change and the API provider is tasked with doing it, not me. It's like having a tax pro working for your website.

[slinc]

In a drop shipping situation who would pay the tax?

Currently if we sell something to a customer in Florida and the drop ship company is in Florida then they charge us sales tax for the drop ship order (we are not in Florida). I assume they then pay the sales tax to the state of Florida.

So does this potential new law mean that it is the drop ship company that does over $1M or the retailer? If it is the drop ship company then what do you do if you have small drop ship companies that do under $1M. Only charge tax on part of the customer's order? This could get very complicated.

[jwolthuis]

In a drop shipping situation who would pay the tax?

Wouldn't the customer pay the sales tax?

You would be responsible for remitting any collected taxes to the state. If you do under $1M annually, then nothing changes, because the law doesn't apply.

[lorax]

Personally, I would like to see the Gov simplify the burden on the merchant by using some form flat state tax - with tiers if they really need them - no more than 3 tiers (based on purchase price) for interstate sales. No other taxes (no regional or local) otherwise they're just creating another behemoth that will suck taxpayer money to manage and police.

[MarkOly]

In a drop shipping situation who would pay the tax?

Every transaction is taxed in the state where 'use' takes place. That's why it's called Sales and Use Tax. State DOR's (Depts of Revenue) make huge money on sales tax audits catching people not paying their use tax.

Alot of people don't realize that when they purchase merch online where no sales tax was charged, they are still liable for remitting the sales/use tax to their state DOR. For individuals, it's never enforced. But if you're a business already registered with your DOR and they see that you're submitting returns every quarter - but that Use Tax section is always blank... They like to let that ride for the full 5-year lookback period, then stick you with an audit and double their money with penalties. So yeah, pay your use tax if you're a biz.

I can't imagine having to submit 51 separate returns each quarter/month. That's alot of bureaucratic bs to go thru. Just setting up the 51 accounts. No way! There has to be some sort of consolidation. Or then again, that's why the $1mil threshold. The big boys with an office in each state already have the 51 accounts in place.

As it is now, you have to setup a DOR account in any state where you have an office or "presence". Currently (for now), shipping to a state does not signify presence. And even if you do have that presence and setup a state DOR account, you still only collect and pay sales tax to that state for items that are shipped to or "used" in that state. Plus pay use tax for all items you yourself "use" in that state, where sales tax wasn't originally charged.

[dpd1]

I assume this is one million gross sales? Because, considering the narrow profit margin for many competitive niches online, I really woudn't even consider 1 million to necessarily be a 'big boy'. I would bet that there are numerous businesses out there, where 1 mil in gross sales might not even translate to 200k profit, at the bottom line. That's certainly not enough to be able to justify having people just sitting around working on stuff like this. It usually takes me over two full days to do my sales taxes and all the BS that goes along with it. And that's only because I talked them into once a year. It would be worse if I did it quarterly.

[lorax]

>> then again, that's why the $1mil threshold

I suspect that threshold will creep downward.

[MarkOly]

I suspect that threshold will creep downward.

Yeah once the big boys start losing sales to the little boys who don't have to charge sales tax to out of staters. That's huge if that's the way it really pans out. People are so accustomed to not paying sales tax. Once it starts up, there's going to be some griping. But being the little boy that I am, I can post that on my home page. "No sales tax here folks!" Then again. I'd have to think about that one.

[jwolthuis]

"No sales tax here folks!" Then again. I'd have to think about that one.

Tread carefully, because "Use Tax" is still due on the purchase. Any claim of "no sales tax" is misleading. Tax is still owed; just not being collected by you.

[bwnbwn]

I know of several small companies that qualify for this tax, they are small but sell really expensive items so 3k a day is one sale for them. I have sent this to them and they are not taking it well. Being a small company this new tax and how complex it can become on the accounting department is going to really hurt.

[Jon_King]

Is this a tax increase? Will the anti-tax block vote for it?

[bwnbwn]

Jon_King no it is not a tax increase. It is a tax on internet sales that right now really does not exist. This will pass, it will become law, and we will have to deal with it in the US. All the other nations will after this is a done deal here will bring it into their coffers if it isn't already being done.

[Leosghost]

It does exist already ..but people do not pay it..they should declare purchases, and pay tax on them..they cheat ..and don't declare them..

In Europe it has existed for a long time..VAT..paid at purchase..and businesses send it to one central tax authority in each of their countries..

Businesses here can "claim back" ( how it actually works is business charge VAT on all sales..and then deduct whatever VAT they paid..they sned the rest to the VAT tax office ) what they paid in VAT..private individuals cannot..

Simplest thing the USA could do, is scrap all local sales taxes of all types..and introduce VAT..at say 10%..( or you could have 3 rates ..0% basic foods and clothing..5% other foods, clothes ..7% books blue rays etc..and services ..10% luxury goods, vehicles etc ) ..the hardest part would be and agreeing what went into which percentage "band"..

Collection is real easy ..so is remittance..

Local property taxes and other business taxes levied by city hall / state etc could stay the same as they are now..or increase ..or decrease as each town , city , county, state wished..

Under a certain turnover level ..say $100K or $500K ..businesses could be exempt from charging it at all..But likewise could not "claim" it..

This is more or less how it works in Europe..

[bwnbwn]

Leosghost interesting thanks, I have a FID number for purchasing farm products tax free, feed, fencing, post etc and it works pretty much the same way. Each quarter I file how much I have purchased if it surpasses a set amount I pay tax on the amount that exceeds the Govt. allowance. It looks like your country has it set up pretty much the same way.

I see the way the US is trying to set up our internet TAX both a burden and a way for a company that falls under the 1 million to make an extra buck.

Example I live in NY the sales tax is 10% I collect 10 bucks on a 100 sale I only do 300k in sales a year. I keep the 10 bucks. The average user will get use to the sales tax and it won't be an issue with closing the sale.

The way our D.A. Govt is trying to do it only opens the door for so many other lets just say shady business it plan stinks.

I have an ecommerce it exceeds the 1mil I break the website into several different companies, I collect the tax, I keep the money how will John Doe from Cocoomo know and report me.

[dpd1]

Simplest thing the USA could do, is scrap all local sales taxes of all types.

That's never going to happen. If they could do that, they would have done it by now. The public, cities and states all start crying about the constitution and how the states are supposed to control their own income, blah blah blah. Some guy in NY says... "Why is my tax as high as somebody in Texas, where they have lower living expenses?... That's not fair!"... on and on. That's why nothing is ever simple here. People would rather see the whole system crash and burn, than make even the smallest sacrifice. And in the end, they usually get something far worse because of it. Like this.

[lgn1]

The Internet sales tax issue, often pops up every few years on this forum, since about 2000. I will believe it when I see it. With the current state of discord in US government, I don't give it a snowball chance in hades, of passing.

However being a Canadian Ecommerce business, with excellent sales volume to the USA, I'm all for this "Buy Canadian" bill.

[lorax]

Collection is real easy ..so is remittance..

There's the rub. Taxes in the US are absurdly complicated and if you miscalculate - you're on the hook for the balance due.

[Jon_King]

I know it has been said this is not a tax increase, however I do not pay tax on most online purchases now and I will if this passes. How is that not a tax increase?

From the NY Times:
"Supporters of the bill include Tea Party conservatives like Senator Ron Johnson, Republican of Wisconsin, and Republican leaders like Senator John Thune of South Dakota. They argue that the bill, which could generate as much as $24 billion in new tax revenues, is not a tax increase at all. It only ensures that taxes already owed are actually paid."

To me I read "new tax revenue" as a tax increase... "$24 billion in new tax revenues, is not a tax increase at all" Huh?

[LifeinAsia]

...however I do not pay tax on most online purchases now and I will if this passes. How is that not a tax increase?

In most states, you are still liable for paying a Use Tax on purchases made out of state. If you live in one of those states and you have not been paying the tax, you have failed to pay an existing tax.

All this does is shift the burden of compliance away from the consumers onto the business owners.

The purpose of a sales tax is supposed to be to benefit the local community where the purchase was made. In theory, if you make a purchase in Small Town, USA, you used the local roads, parking facilities, etc. to get to the store and make that purchase. So (again, in theory), the sales tax collected should be used by Small Town for maintaining the roads, building new parking, paying for police to keep the streets safe, etc.

Don't buy into the "trying to close the loophole that is hurting B&M businesses" or "Internet businesses cheating by not collecting taxes" crap. Internet businesses are playing by the same rules that have existed for decades for mail order businesses- they are not required to collect sales taxes for states where they do not have a physical presence. (But again, residents in those states are still liable for the use tax on items purchased out of state.)

A flat Internet tax is not going to fix everything (and will make things worse for many). A good portion of the money collected will be wasted to feed the bureaucracy that will administer the new tax infrastructure. Also, let's say the Internet tax is 5%. If you live in California and the local tax is 9.5%, you'll still be liable for the 4.5% difference. And for those people living in states with no sales tax? They're really going to be shafted!

[RhinoFish]

The argument is that you're supposed to be paying taxes, sending them into your state on your own. This will let the store collect it and remit it for you, since you're a cheater.

I'm using "cheater" tongue in cheek here, not aimed at you as an individual. But truth is, most people are required to do this, by their state govt, but they know it's not enforced, so they skip it.

What state do you live in? Here in Florida, for example, we're supposed to:
[dor.myflorida.com...]

[ssgumby]

If it does pass, hopefully it is a loooong integration period. I would hope id have at least 12 months to figure out how to calculate the 5 gazillion tax rates, how to pay to every tom dick and harry jurisdiction and find the money to pay an employee to handle it all.

[Jon_King]

Currently, if I buy a laptop from Amazon and there are no taxes applied at purchase, I am supposed to send the proper tax amount to the state?

Is this correct?