Tuesday, December 20, 2016

Sales Tax For Online Businesses

If you are doing business online in the United States, you should consider whether or not you should be collecting sales tax?
Many states and local governments impose a tax on the sale of goods, including digital goods. If you reside or do business in one of those jurisdictions, then you may be required to collect the appropriate tax and remit it to the state.
Tax On Internet Sales
Sales tax on internet sales is a new and evolving issue. Most states would like to make business owners the states' involuntary enforcement agents for purposes of collecting the taxes. The states would like to impose the burden of collecting the tax and sending it to the government on the merchants - at little or no compensation.
In the "old days" it was simple. If you operated a brick and mortar business in a jurisdiction that imposed a sales tax, you were required to collect the tax at the point of sale and remit it to the government. The state could impose this burden on the merchant because the merchant was physically located within the state and, therefore, subject to the state's authority.
Now, internet businesses are doing business worldwide, but without a physical presence in most of the jurisdictions in which they are potentially making sales. In fact, in the digital world, it's even difficult to decide where a sale is made.
As a broad, general rule, if a merchant does not have a physical presence in a state the old rules continue to apply and the merchant cannot be required to collect the taxes for the state. In that situation, the consumer is normally required to report and pay the tax to his or her own state, although most probably failed to do so.
Which States Have a Sales Tax?
For now, this is a state issue. The federal government has no such tax, although there is no doubt our friends in Washington would love to get a piece of the pie.
It is easier to list the states that do not have a sales tax:
  • Alaska
  • Delaware
  • Hawaii
  • Montana
  • New Hampshire, and
  • Oregon
If you are in a state other than one of those listed above, then you are subject to your state's and maybe your local government's sales tax requirements and you should contact the appropriate agency to be sure you are complying with the requirements.
Sales Tax & Affiliate Marketers
One final point to consider is how sales taxes affect affiliate marketers. Basically, if you are an affiliate marketer you are a commissioned sales person. You are only making referrals to a merchant, not actual sales, so the sales tax rules do not affect you. The merchant is required to collect and pay the tax where applicable.
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