Online Sales Tax: Whose Side Are You On?

Lately, one of the biggest discussions among e-commerce merchants is the topic of collecting sales tax for online purchases. In fact, if you Google the phrase “sales tax law,” you’ll get more than 291 million results.

Most e-commerce business folks have been registered in their own states and collecting online sales tax since they became business owners. However, as the budgets of cities, counties and states became tighter, and bankruptcy options began to be considered by these entities, they began scouring their tax laws to find new sources of revenue and enforce old laws that have been on the books for years without any “teeth”—such as the use tax laws most states have.

Use tax: recouping lost sales tax revenue

What is a “use tax?” Well, that is the tax you are supposed to pay to your state when you buy something on the Internet and don’t pay any sales tax. I’ll bet many of the folks reading this article have neither heard of this law nor knew what it was until they read this.

I didn’t have a clue until I heard Cliff Ennico speak at an eBay event a few years back. He explained what a use tax is, and suggested that the best way to avoid an audit is to at least estimate and send in $50 a year to cover purchases if you hadn’t kept track. It seems that as far back as 2009, many states began to contact small businesses and ask about their use tax, and even perform audits based on this. It was the state’s way of recouping some of its “lost revenue” when you purchased out of state to avoid paying the state sales tax.

In addition, three separate Internet sales tax bills now before Congress would eliminate the current requirement that an online seller collect sales tax in those states where they have a physical presence (called a “nexus”), and instead require businesses to collect sales tax across all states.

Taking a stand on sales tax

In the face of this growing threat to the Internet’s “tax free zone,” the two largest seller platforms, eBay and Amazon, have started going public with their positions and making moves toward Congress and state governments. Interestingly enough, they have very different opinions of how this debate should be settled. It is true that Amazon has its own product to sell, whereas eBay is “just a venue” for sellers to sell their own merchandise. This, to some extent, explains their different positions. I’d like to know which position you favor.

eBay Main Street is eBay’s political arm, if you will. The organization recently sent a group of 20 sellers to Washington, D.C. to speak to the politicians. If you are an e-commerce merchant, I highly recommend joining the eBay Main Street program to keep informed on this and many other issues.

eBay makes its position on sales tax very clear on the eBay Main Street site with this introduction:

“No matter what you call it, eBay Inc. opposes raising taxes on the Internet or its users, as well as any attempt to impose Internet sales tax collection burdens on the small businesses who least can afford it. This is certainly not the time to impose a major new tax burden on Internet vendors working to implement successful new business models, nor is it wise macro-economic policy to impose what is effectively a tax increase on American consumers.”

Amazon, on the other hand, has a different position. After initially opposing online sales tax, Amazon now states that it supports “a simple, nationwide system of state and local sales tax collection.”

Where do you stand?

So, what do you think? Most of us shop both online and at offline, brick-and-mortar stores. Do you feel, as eBay does, that any kind of sales tax levied on Internet merchants would be too difficult for small business to handle? Or do you take Amazon’s position, which seems to be that some kind of sales tax law is inevitable, so let’s try to get a fair federal law instead of waiting for each state to make its own?

To learn more about how the sales tax issue affects Fulfillment By Amazon sellers, sign up to receive information about an upcoming book Introduction to Sales Tax for Amazon Fulfillment Sellers.

The post Online Sales Tax: Whose Side Are You On? appeared first on The Online Seller.