Introduction
Online sales tax is a reality that many online entrepreneurs are not yet ready or well equipped to deal with. While the IRS does not concern itself with the collection of online tax, many state tax bureaus are. Therefore, crossing a state border can have a huge impact on your tax obligations. Many of these state tax bureaus can be very aggressive at pursuing any taxes owed to them. Therefore, it behoves online entrepreneurs to acquaint themselves with the tenets that govern online sales tax. Here are some of the major factors to consider:
History
The Sales Tax Laws in your State
One of the daunting facts of complying with online tax obligations is the lack of consistency in rules stipulated by the different state sales tax collection bureaus. Some states may require that all businesses which operate a nexus (a physical office) to charge sales tax for goods sold online within that state. However, in most circumstances, out of state businesses conducting online transactions will not be expected to charge sales tax on their online sales. The definition of a physical business will differ from state to state. For some, it may mean an office, for others a warehouse, while some states will even consider regular business trips into that state for the purposes of conducting business, as a taxable obligation. The Supreme Court had a great hand in the development of these rules, especially in respect to sales based on mail orders. This rules may eventually change, as more states start to implement a sales tax on all business conducted online.
Features
The Software used to create your business’s Shopping Cart
It is vital to take into consideration the type of software you use to handle online tax. Some software will only be able you to perform basic online sales tax functionality, leaving you work out the details on your own. However, some offer more functional features like allowing you to set specific sales tax figures for different states. This will in turn allow you to generate a report of sales figures for different states, so as to pay the individual tax agencies. If you are not equipped to configure your shopping cart to collect sales tax, then you should consider hiring a virtual assistant who specialises in shopping carts.
Tips and comments
Don’t be caught unawares
The collection of online tax is likely to remain a contentious issue until a universal approach has been setup. If your business is heavily dependent on online sales, it would be wise to stay abreast on any discussions and changes that occur in your state and the customers you serve. Check with your state’s revenue collection bureaus to see if they provide a mailing list or any other notification service. Most CPAs also make it their business to stay conversant with such matters, and will provide you with newsletters or online updates on the tax rules that apply to their state. It will serve you well to check with tax professional on the rules and regulation that govern online sales tax both in your state and on a national level.
