Sales Tax Article For Online Marketing

Here is a short article about Web site sales Taxes. This article does a good job covering the basics of handling sales tax issues and online marketing.

Collecting Sales Tax for Out-of-State Sales by Dr. Ralph F. Wilson
www.wilsonweb.com/ecommerce/salestax-sst.htm

"I am with a community college and am starting an e-commerce venture. Our college's business manager believes that we should be charging out-of-state buyers their state sales tax. This doesn't seem to be common practice, but he says it is a grey area and some state could come after us demanding payment. What do you think?" -- Ron Faulkner

On legal matters, of course, you should consult an attorney; the following does not constitute legal advice. The short answer to your question is that the US Supreme Court ruled in Quill Corp. v. North Dakota (1992) that mail order businesses don't need to collect sales taxes except in states where they have a physical presence. A company is required to collect sales tax only for its own state (unless the organization has a site, office, or store in another state also).

However, Streamlined Sales Tax (SST) legislation is gradually being adopted by specific states (www.streamlinedsalestax.org). When this is in place, Congress will probably require companies over a certain revenue threshold to collect other states' sales taxes.

To implement this, cooperating states are working to simplify their tax rules for online sales to make tax collection more feasible. Probably smaller businesses and organizations will be exempted because of the hardship and expense involved. Larger retailers will need to use software, such as Taxware and Alalara AvaTax, that calculates sales tax according to ZIP code for the state to which goods are shipped. A few large retailers are collecting sales tax now in multiple states in exchange for a guarantee of future immunity in case a state would ever file a suit against them for sales taxes due. But no state is likely to go after a small organization -- especially one that doesn't have a physical presence in multiple states -- since the costs of a suit would greatly outweigh any potential gain. In the Web Marketing Today Research Room we track articles and resources on "E-Commerce Tax Collection" for our paid subscribers (www.wilsonweb.com/cat/cat.cfm?page=1&subcat=cm_Taxes).

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