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...]

[jwolthuis]

I am supposed to send the proper tax amount to the state?

Not exactly; you don't send in the tax individually for each purchase.

In my state, if I buy a laptop for my own use, I claim the amount of use tax on the state 1040 on April 15th.

Now if I buy that laptop for my dad (located in another state), he owes the use tax. The tax is owed based on the shipping address, not the billing address.

Also, based on your state, the shipping may also be taxable (included in the purchase amount). Each state is different.

[RhinoFish]

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?

I'm assuming you're in the USA...
What state do you live in?

[RhinoFish]

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.

The legislation forms a national level organization that will certify service providers you can plug into your cart:
[streamlinedsalestax.org...]

This is one very major point of this whole thing, make it easy for merchants to implement and comply. Dispute resolution will also be something the merchants can avoid (as long as you choose to work with a certified service provider).

[votrechien]

The legislation forms a national level organization that will certify service providers you can plug into your cart:
[streamlinedsalestax.org...]

This is one very major point of this whole thing, make it easy for merchants to implement and comply. Dispute resolution will also be something the merchants can avoid (as long as you choose to work with a certified service provider).

Interesting. I remember hearing at the congressional hearing from a service provider but I didn't know the extent the government would work with and regulate such providers.

I'd still like to hear how the handle the whole audit issue and more importantly how they'll handle the fee structure for these service providers. If these service providers are going to charge thousands per year for their services this will be a huge deterrent.

[ken_b]

If these service providers are going to charge thousands per year ...

Maybe they'll just charge per transaction. Of course a few cents per transaction can still add up to thousands of dollars per year, but it sounds more manageable at first glance.

[RhinoFish]

from: [streamlinedsalestax.org...]

How does technology ease the tax collection burden?

Answer: Most businesses use software to manage their sales tax responsibility. The states partnered with the private sector suppliers of sales tax administration software to certify the accuracy of their software. The states also help pay for the software for some retailers. These certified software packages do not slow down the sales process because they are quick and easy to use. Any business that uses Streamlined - certified software is immune from audit liability for the sales they process through that software. In addition, the states pay the cost of this service for any business that does not have a physical presence in the state. There are currently six certified companies and there will be more in the future.

[RhinoFish]

Lots of good info in the FAQs, one of which I pointed to in the above post, here's the full FAQs:

[streamlinedsalestax.org...]

[RhinoFish]

from: [blog.fedtax.net...]

Which brings us to what wasn’t said: The market has already acted. A completely free sales tax management service is available right now. TaxCloud calculates the sales tax due for any region of the county, collects and remits sales tax, files sales tax returns, creates detailed records of sales tax transactions for shop owners, and even provides indemnification and audit relief—in short, it resolves every concern raised by Senator Kelly Ayotte (R-NH). It does all this at absolutely no cost to the business.

[RhinoFish]

The states pay the CSPs, and it appears that TaxCloud article posted above, is saying that the merchants fees are zero (they can run their biz on just the cut they get from the states).

[StoutFiles]

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

This is likely what's going to happen. Or you can go it yourself, but good luck.

[RhinoFish]

Some good points here:
[news.yahoo.com...]

1) Businesses with less than $1 million a year in out-of-state sales would be exempt.

2) "This is a sales and use tax which is on the books," said Michael Kercheval, president and CEO of the International Council of Shopping Centers. "This isn't a tax issue. It's a tax collection issue."

3) "Kercheval's group is part of a broad coalition of retailers that supports Enzi's bill, including Internet giant Amazon, which says it wants a uniform national policy for collecting taxes on Internet sales."
(Yes, most of the people who will have to collect it, whose biz will be affected by it, support it - because of it's simplicity and burden relief to them.)

4) "Supporters say the bill makes it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States also must establish a single entity to receive Internet sales tax revenue, so retailers don't have to send them to individual counties or cities."
(Sell over $1M out-of-state, add the plugin to your cart - and your sales tax admin / compliance / dispute resolution / implementation work is eazy peazy lemon squeezy!)

[lgn1]

They talk about out of state; what about out of Country? Will US customs collect the sales tax, for shipments outside the USA?

Under section 321 of the US customs act, Customs does not collect import duties or taxes for any shipment less than $200, except in the case of some extremely rare exceptions. Are they going to revoke section 321?

[phranque]

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

it should be noted that several of the very "authoritative"-sounding resources being referred to above are registered to one individual at a privately-owned organization with a vested interested in this senate bill becoming law.
marketplacefairness.org, fedtax.net and taxcloud.net are all one voice.

[LifeinAsia]

Are they going to revoke section 321?

I believe sales taxes and import duties are different beasts. If you live in a state that requires you to pay use taxes on out of state purchases, if you buy it out of country you'd still have to pay the use tax regardless of if customs duties were paid.

[RhinoFish]

This bill has nothing to do with tariffs, import / export taxes, stuff outside of the USA. It just lets US states work together, to collect sales taxes that the consumer was suppose to pay themselves.

[RhinoFish]

Phranque, good catch, but rest assured, there are already 6-7 CSPs who are certified. Meaning these domains may below to one of them, but they'll be competing, and each store can pick their provider.

I also have a vested interest (as do most). My biz very often relies on affiliate links to be paid, and without a federal solution, if the state I live in (Florida) were to pass an Amazon Tax Bill (I think 7 states have passed these bills, more are pending), then my clients may be forced to collect Florida sales tax. In addition, I'm a (volunteer) PMA board member, and the PMA supports this bill. (I volunteered to serve on this board, because these state by state tax laws are killing affiliates and performance marketers.)

I'd argue that anyone who sells online, stores, service providers, affiliates, and more - all have a vested interest one way or the other.

People can reasonably choose one side or the other, but it's pretty easy to see many are worried or uninformed about implementation, CSPs, and what the bill means. Shoot, this morning I heard a small store owner being interviewed on the radio, and she said she'd have to hire someone to implement the tax collection schemes - she's uninformed, this bill's main purpose (to stores) is to make it easy for stores to collect / administer / remit the tax. If this bill doesn't pass, state bills likely will (many already have), then the admin nightmare she fears, will come.

[LifeinAsia]

The reason I do not support the bill is simple- it violates the law and spirit of sales tax.

Sales tax is supposed to be collected at the point of sale. If I buy something at a store in my county, I pay 7.5% sales tax. If I cross the street to the next county and buy the exact same thing, I would have to pay 9.0%. If I buy online, I would pay the retailer 0% (up until recently), but I would still legally owe the state 7.5% use tax.

The poor sap in the next county doesn't like having to pay the extra 1.5% for all his local purchases, so he's going to a lot of shopping in my county. But if he buys online, he's still going to have to pay 9.0% based on his shipping address. (If he's smart, and lives close to the county line, he'll probably get a PO box in my county and use for all online purchases- I see a new industry here...) Oh, and if he travels to Oregon and buys the same item, he pays no sales tax to the merchant (although he is still legally obligated to pay 9.0% to the state). Yet if he stays at home and buys the same product from an Internet company based in Oregon, he'd have to pay 9%. If he buys the same item from a mail order catalog, he'd pay 0% sales tax to the retailer (but still owe 9% to the state).

The law clearly discriminates against Internet retailers. If the law required all B&M stores (as well as mail order) to charge the appropriate sales tax based on the address of the buyer, then I might be for it. But that obviously won't ever happen.

[Leosghost]

Sales tax is supposed to be paid at the point of sale..

there ya go ..fixed it for ya :)

USA wide harmonised VAT would still be so much easier..as I said earlier..:)

BTW..I'm about to be charged French TVA ( at 19.6% )..by a USA hosting company..based upon where I live ( France )..whereas you..in the USA ..won't be charged it..at all..by the same USA hosting company..

[LifeinAsia]

Sales tax is supposed to be paid at the point of sale..

there ya go ..fixed it for ya :)

Let me rephrase- Sales tax is supposed to be paid at the point of sale based on the physical location of the retailer.

[ssgumby]

I get that there will be web service plugins to help calculate, but the time for some folks to integrate that into their checkout flow could be massive. Ive not yet seen how reporting works, so if I have to report to every jurisdiction, file to get tax ids for those jurisdictions, file the montly/quarterly/annual form, that is a huge time issue.

let me say, I have no issue with taxing internet sales, I just wish it could be one flat rate paid to the feds.

[Kendo]

Is this taxable?

User in Brazil orders software online from a website hosted in USA but the funds go to a bank in Australia. The software is delivered by email and a CD is dispatched from Singapore.

Would this only be taxable if:
a) the user resided in the US?
b) the supplier resided in the US?
c) both user and supplier resided in the US?

[incrediBILL]

Senate Passed the tax bill.

Discussion continuation here: [webmasterworld.com...]

[edited by: phranque at 6:07 am (utc) on May 7, 2013]
[edit reason] fixed the url [/edit]

[bwnbwn]

I have a question since I pay to be a member in WebmasterWorld and a few other places will this be taxed as well?

BTW in Texas there is no tax on food so any food items say a frozen ham I buy from Wisconsin should not be Taxed, then again how will they know in Wisconsin.

Also protein supplements are considered food in Texas and are not taxed. I am sure there are other States with different taxed or not taxed items, and we have people without a clue in the world writing this tax. I am so glad I got out of the ecommerce buz.

[Edge]

Until the bill makes it through congress and is signed by the president - it does not exist..

Moreover, when and if it comes to be law there will likely be a start date sometime in the future (it won't be retroactive)..

I'll worry about the details after the president signs the bill..

[Awarn]

Believe it all you want. I am a CPA and do a LOT of taxes. I have used tax software for over 20 years. This is a nightmare waiting to happen. This past year has been the worst in over 20 years for software. With the last minute budget deal the software had so many bugs it was crazy, and I am not talking about cheap software. I waited on hold for customer support 3.5 hours one day and 6 hours another. This will go the same way as all the others did. There will be small Tax collection software companies then they will get bought out by larger firms and then a transmission fee will be charged then another fee. Then service and customer support will decline to save money and maximize profits and the next thing you know you are spending an hour a week doing it and paying fees on top of it. I read the stuff and they are already talking about using the 9 digit zip codes. At 9 digits your getting real precise. For this thing to work the states need to be willing to give a little like take a flat rate for the whole state. In Ohio alone there are like 88 different taxing districts. Also realize that most taxing districts charge a fee if you pay my credit card etc so don't expect to file a nice online form and enter a credit card and pay the liability. Oh sure it will be set up to do that but then you pay a 3-4% convenience fee because the states don't want to lose that revenue that credit card companies charge to allow credit cards to work. So look at your sales times like 7% times like 5% (4% credit card fee and a 1% transmission fee) and that is what it will cost you. At 1 million in taxable sales I would expect at least 3500 a year. Then throw in say another 50 a month for the tax administration software. So a good 4000 a year minimum.

[Realbrisk]

And dont forget it the merchant that will be paying the credit card/Paypal/google checkout fees on the taxes collected and getting zilch in return

[netmeg]

It's going to be a royal PITA for my clients, all of whom are doing more than a million in online sales. I mean, tax rates vary sometimes by *county* (and I'm told by some products in some places, but I haven't confirmed that yet). I'm sure we'll be hiring a service.

[bwnbwn]

Awarn I can confirm what you just said. Our office CPA just last week told me the exact same thing you just said.

He then brought up the internet tax because we do some online sales here, and he said he would have to raise our rate if this went through.

Now we are looking to see if we want to keep this part of our company or close it down.

Edge look around our country do you really think they won't go after this gold mine.

[Awarn]

I do not expect it to get through the House. They have been trying for years. It could cause inflation and the consumer use tax is already on the books in most states. So the next question is whether that makes us one step closer to paying income tax in each state too. The long standing theory has been since you aren't physically in that state you aren't subject to income tax for that state. If this passes it kind of blurs that stance.

[RhinoFish]

Netmeg, the whole point of the Certified Service Providers and SSUTA is too (1) streamline the complexities out, and (2) make sure the merchant does NOT have to calculate or get into dispute about the details, it's offloaded to the CSPs.

Imo, the royal PITA is the growing numbers of states, completely apart from the MFA, that are passing laws based on weak nexus arguments... meaning, if your client wants to avoid the PITA, there are two choices:
+state by state growing fiasco.
+MFA simplified for merchants, cuz the CSPs do the figuring, and disputes are between the SSUTA and the states (merchants stay out of it).