eCommerce Sales Tax Laws

There are two certainties in the world of ecommerce and taxes is one of them. There a lot of misconceptions about your responsobilities when it comes to collecting taxes as an ecommerce store owner. This article is intended to help you discepher all of that and guide you through the murky waters of collecting taxes as an ecomemrce store owner, but ultimately it is your responsibility, you need to make sure you abide by the tax laws set in your state for ecommerce store business owners and consult with your accountant.

Right now as our country faces an economic crisis and when state misanticipated their investments, face a declining sales tax revenue and many other challenges, they are looking closely at every avenue where they can tax and your ecommerce business is coming up. eCommerce is one of the last frontiers left to be tax-ed and it's going to come and come soon enough.

The New York State of Taxation and Finance was the first to hit ecommerce businesses with a tax by instituting a law that in simple temrs stated, that any business that had operations in the Sate of New York and was sending taxable items to anyone in that state, and hence taxes needed to be collected.

Let's use an example: Amazon.com has offices in the state of New York and therefore any orders that origianted outside the state of New York, but were t going to be delivered to a resident in the state of New York, then that sale needed to be tax-ed.

Before you launch your ecommerce business be sure to obtain the appropriate city and state licenses or you could face some hefty penalties. This is a statement found on the New York State of Taxation and Finance website for new business owners.

"If your business makes taxable sales before receiving a Certificate of Authority, you may be subject to a penalty of up to $10,000."

An example of a City license, is your business license. Since most ecommerce businesses operate out of a home or a PO Bos, a City Business License is still required, so be sure to visit your local city's business license division office. Commonly found in the City's Financial Division. Cities, large or small depend on collecting annual permit revenues, so be sure to have your city license, as they will be well aware if you have a state reseller's permit. So with that being said, if you have your state reseller's license, but do not have a local business license, you could be subject to fines and penalties for operating an ecommerce store out of your home withour a business license.

Here's another great example as to how local and state agencies are trying to reign in on collecting sales taxes; In June 2009, the State of North Carolina's Department of Revenue tried to argue that any ecommerce business that has affiliates in that state is and should be mandated to collect sales tax revenues for any all all sales thst occur or originate from an affiliate in that state.

As you may all know, affiliates are a keyy to succeeding in the world of ecommerce and as a matter of fact most ecommerce shopping cart software solutions have a module that will allow you to have an affiliates program. This simply allos you to give anyone that signs ups as a affiliate from your ecommerce store a code to track any and all sales originiating from that affiliates website.

So, if that law had passed, any ecommerce store that ahd affiliates in the state of North Carolina would have ahd to collect taxes for any sales originating from and to that state, file and pay the appropriate taxes with the state. So what did big ecommerce businesses like Amazon.com do? They terminated all affiliate relationships in that state. You know that had to hurt and unfortunately it hurt small website owners that were just making a good buck from referring people to great sites that are selling great products and providing a great service.

So what's next in the world of ecommerce sales tax laws? Not sure, but rest assured that as more and more states face grim sales tax revenues real estate and public money investment nightmares, they will look and find a way to tax every aspect of an ecommerce business. Be sure to stay tuned and connected to what's happening in your ecommerce business world and act accordingly, as when it comes to collecting taxes, you do not have an option.

So what are the ecommerce sales tax laws you must abide by? Simple: if a customer orders item(s) from yoru store and they reside in the state in which you do business, then you must and it is your responsibility to collect and pay taxes to the appropriate state agency.

Tax Laws and Issues – E-Business & E-Commerce

Internet Sales are Taxable
Misinformation about laws such as the prohibition of the taxation of Internet access (Internet Tax Freedom Act) and limiting sales tax on interstate sales have lead some to incorrectly believe that Internet sales income is not subject to income tax.

An online business may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your sales may result in capital gains, nondeductible personal losses, or you may have ordinary business income.

Be sure to visit the www.irs.gov for more details

Last updatred: August 31, 2009

eCOMMERCE SALES TAX LAW

By K2COMMERCE.COM

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