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What You Need To Know About Internet Sales Tax (Part 2 of 2)

This is part two in a two-part series. Read part one here.

We covered the basics of who needs to collect Internet sales tax from what buyers in today’s world in part one, but we didn’t address the future of Internet sales tax.

Unfortunately, this has been a hot-button issue and it’s not going away anytime soon. As long as your setup is fairly straight-forward and local, you only have to deal with your own state’s laws when it comes to sales tax, but most eCommerce businesses take advantage of their global connections.

The Future of Internet Sales Tax

The second you set one foot across state lines, either because you sold something to a resident of another state or because you’ve hired additional sites for quicker warehousing distribution of your products, your tax situation gets a lot trickier. There’s pending legislation in Congress called the Marketplace Fairness Act of 2013, a reformed version of the original Marketplace Fairness Act introduced in 2011.

Under this proposed legislation, states would have the right to require online sellers to collect sales tax, even if there isn’t a physical presence in that state. There is an exemption, provided your business grosses under $1 million dollars in remote sales within the US. That sounds like a pretty big loophole, but if you’ve got a few employees and some overhead, collecting $1 million in gross revenue can happen quicker than you might imagine.

Even though the Marketplace Fairness Act hasn’t passed yet, the fact that this is one of many attempts at taxing the Internet means that it’s only a matter of time before something similar is enacted for real. This is why it’s so important to keep up with the ever-changing landscape of Internet sales tax legislation.

Internet Sales Tax Impacts

The businesses that most Internet sales tax legislation will truly impact are those that are just starting to branch out into models similar to Amazon’s, with multiple warehouse locations in place to speed up deliveries. Although the impact should be minor financially, it may take some time for users to understand and appreciate why your business has suddenly started collecting tax in their state.

In that way, eCommerce in general may suffer some pushback from public opinion if an Internet sales tax is imposed, but hopefully, those slings and arrows will be short-lived as buyers adjust to the new norm. If you’ve kept an ear to the ground and anticipated the change coming, you’ll be better able to keep your customers happy and in the loop.

*Editor’s Note: For all tax-related matters, be sure to consult your own financial advisor directly.

 

February 05, 2015
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