Paying Taxes for Web Based Sales
What Does the Legislation Say?
It has been said that the only constant in life is taxes. Not even the Internet is safe from this government-imposed charge. When you sell goods or products online you are subject to Internet sales tax rules. These rules vary by state and have been a point of debate at the state and federal level.
The Marketplace Fairness Act of 2013 requires large online retailers to collect sales taxes for the states in which they ship goods (those with more than $1 million in remote annual sales). Until 2013, older legislation stated that stores could only collect sales tax if they had a physical presence in the state, like a storefront or distribution center.
In legal terms, this physical presence is known as a “nexus” and each state has a different definition. To determine if your business qualifies as “having a physical presence,” contact your state’s revenue agency for clarification.
Fifty years ago it was too complicated to calculate applicable sales tax on every point of sale. The burden for store owners would have been too great. Technology has eliminated that historic burden and you are now required to pay state sales tax on goods purchased via the Internet. The familiar “shopping cart” feature on all major retail websites is the virtual software that recognizes and applies the correct sales tax for the transaction. The recent legislation helps to correct the unfair advantage that online retailers have over stores with an actual physical presence in the state.
Good News for Online Sellers
Under the Marketplace Fairness Act of 2013, online sellers with less than $1 million in remote sales annually are exempt from the collection requirements. This exception is key for Ebay, Etsy, and other online market place shoppers and sellers.
It may seem like the Internet tax is new and causing you to pay more, but in reality you are paying the same sales tax rate you would pay if you purchased the items at your local store.
- Determine the sales tax rate in your state via your address.
- Learn the specific rules for Internet-based taxes via your state location.
About Sales Tax in the United States
Forty-five states collect sales tax. Alaska, Montana, New Hampshire, Delaware and Oregon impose no sales tax on their residents. In addition to sales tax, many cities, townships, and municipalities impose a local sales tax. Although Alaska and Montana do not have a sales tax, a local sales tax may apply in certain areas.
The following states have the highest average combined state-local sales tax rates for 2015:
- Tennessee – 9.45 percent
- Arkansas – 9.26 percent
- Alabama – 8.91 percent
- Louisiana – 8.91 percent
- Washington – 8.89 percent
The following states have the lowest average combined state-local sales tax rates:
- Alaska- 1.76 percent
- Hawaii – 4.35 percent
- Wisconsin – 5.43 percent
- Wyoming – 5.47 percent
- Maine – 5.50 percent
Regardless of the sales tax that is imposed online, you will be aware of it before purchasing or selling a product. Paying particular notice to website policies on selling/bidding websites and reviewing the breakdown of charges in your online shopping cart can go a long way in preventing surprise when you receive the bill.
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