What Reintroduction of Internet Sales Tax Means for Online Sellers (cont.)

What Reintroduction of Internet Sales Tax Means for Online Sellers (cont.)

In our last blog post, we featured an article discussing the Marketplace Fairness Act (MFA) and how it negatively affects small business owners. You can read that post here: (http://bit.ly/2rI3BFq). This post will focus on the second internet sales tax bill being introduced, the Remote Transaction Parity Act (RTPA) and the unfair burden it will have on online sellers. Recap of the Remote Transaction Parity Act Similar to the Marketplace Fairness Act, the Remote Transaction Parity Act would not affect existing nexus, but would require retailers to collect sales tax in remote states, as well as in states where they have nexus. The RTPA works on a tiered system, with online sellers making $10 million in sales or more subjected to the law in the first year, online sellers making $5 million in sales or more subjected to the law in the second year, and online sellers making more than $1 million in sales subjected to the law in the first year. EXCEPT online sellers who utilize “an electronic marketplace for the purpose of making products or services available for sale to the public.” These sellers – a grandmother who sells on eBay after retirement or a college student dipping her toe in the water to sell on Etsy – would be required to collect sales tax in every state, no matter if they make $10mm in sales in a year or $10,000. Sellers on online marketplaces – which are right now the training ground for online sellers getting their eCommerce start – would be subject to the administrative burden of collecting sales tax from buyers in every state...
What Reintroduction of Internet Sales Tax Means for Online Sellers

What Reintroduction of Internet Sales Tax Means for Online Sellers

For many small businesses that sell online, the reintroduction of the two sales tax bills will affect them greatly. In a post written by Mark Faggiano, the founder of TaxJar summarizes how these two bills reintroduce internet sales tax in way that may make filing tax returns much more difficult. Today’s post will share information on the Marketplace Fairness Act and our next post will explain the Remote Transaction Parity Act. Earlier in the year Congress promised to tackle tax reform in the spring, and that resulted in the reintroduction of two internet sales tax bills: the Marketplace Fairness Act (MFA) and the Remote Transaction Parity Act (RTPA). We’ve written extensively about both of these bills in the past. In short, both of these are bills with bipartisan support, but very tilted toward the welfare of states and brick and mortar stores with no online presence. Unfortunately, and probably unknowingly, both bills will place a hugely unfair burden on online sellers if passed. Recap of the Marketplace Fairness Act If this act passes, online sellers who make more than $1 million in remote (non-home state) sales per year would be required to collect sales tax not only in the states where they already have sales tax nexus, but in any states where they don’t have a nexus at all. The $1mm is remote “sales,” and not profit. As it currently stands, the precedent set in the Quill v. North Dakota case of 1992 protects retailers from being required to collect sales tax in states where they do not have a significant presence. This law would strip that protection away...
LA County Sales Tax Increase July 2017

LA County Sales Tax Increase July 2017

As you may be aware, there is an increase in the LA County sales tax rates taking effect July 1, 2017. In November 2016, voters approved Measure M which applies to Los Angeles County including all cities and unincorporated areas. It is imperative that you know which tax rate applies if you sell to those outside of your business location. At this time, the BOE is not increasing the sales tax for the passage of Measure H (Sales tax for Homeless Services and Prevention) which was approved in March 2017. Increases usually don’t take effect less than 6 months after the vote is approved, so it could potentially be implemented as early as the 4th quarter of 2017. We’ll have to watch for information to know when this increase will take effect. Unless a city has passed addition legislation for a higher tax rate, the new percentage will be 9.25%, up from 8.75%. The following cities will have a higher rate:   Avalon 9.75% City of Commerce 9.75% Compton 10.25% Culver City 9.75% Downey 9.75% El Monte 9.75% Inglewood 9.75% La Mirada 10.25% Long Beach 10.25% Lynwood 10.25% Pico Rivera 10.25% San Fernando 9.75% Santa Monica 10.25% South El Monte 9.75% South Gate 10.25% As a retailer, if you charge the incorrect tax rate, you are responsible for paying the difference. The proper rate will be calculated on the sales tax return when the information is filed. The tax rate is determined where the customer receives the merchandise, not where your business is located. A sale is considered to have occurred when the client receives the merchandise unless the contract...
New CA Sales Tax Rate Effective January 2017

New CA Sales Tax Rate Effective January 2017

An unusual occurrence is about to take place on January 1, 2017. The state-wide sales tax rate is going to DECREASE. Due to the expiration of an increase passed in 2012, the rate will drop .25% in all jurisdictions from 7.5% to 7.25%. However, the total tax rate in many cities and counties will remain higher than the statewide rate because of local voter-approved district taxes in those areas. To find the full tax rate in your city or county, go to the Find a Sales and Use Tax Rate webpage and enter the address as prompted. (Please note that the 0.25 percent statewide tax rate decrease will not be reflected on this website until January 1, 2017). For additional information on the sales and use tax rates, you may also visit the California City & County Sales & Use Tax Rates webpage. For more information on district taxes, please see publication 44, District Taxes (Sales and Use Taxes).Below is some information you may find helpful in the event you charged too much, or are in an agreement with a fixed fee that includes sales tax in the price. Below is some information you may find helpful in the event you charged too much, or are in an agreement with a fixed fee that includes sales tax in the price. If a Retailer Charges an Incorrect Tax Rate A retailer who continues to charge and collect the higher statewide sales and use tax rate after January 1, 2017, must either refund the excess tax collected to their customer or pay the excess tax to the Board of Equalization (BOE). If...
What Small Businesses Need to Know About Sales Tax and Shipping

What Small Businesses Need to Know About Sales Tax and Shipping

I recently read a post on the Avalara website (this company has software that can help with your sales tax compliance) and I thought I’d share their information with you. As states continue to change rules on what is and isn’t taxable, it’s good to keep up with new information regarding issues related to the collection/remittance of sales tax. the blog states: For small businesses selling goods online to remote customers, shipping is an integral part of doing business. And some states tax shipping costs just like they tax the purchase price for a product sold. But then again … some states don’t. If you want to get your sales taxes right and avoid noncompliance penalties, you need to know when sales taxes on shipping apply. Know your nexus As always, knowing your nexus is the first step to making sure you are within compliance, and shipping costs are no different. If you have nexus in a state, and that state taxes shipping costs, then you will be required to collect sales taxes on those orders. These guidelines assume that you are directly using a common carrier, such as USPS, UPS or FedEx. Using a drop shipper or delivering products yourself may create different scenarios. Know which states you need to watch out for The following states tax shipping costs when they are part of an order, regardless of whether the shipping charge is part of the price of the item or listed separately. Arkansas, Connecticut, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio,...
Will You Have to Collect Sales Tax For Out of State Sales?

Will You Have to Collect Sales Tax For Out of State Sales?

Are you a business selling products to other states? If so, you may be required to collect tax on sales outside of your home state in the not too distant future if you aren’t already required to do so. States are in desperate need of funds, and are looking to internet sales to bring in additional revenue. Currently a business only has to collect sales tax for purchases outside of their state if they have “nexus” which is defined as having a significant physical presence. In the past, this has meant having a warehouse or distribution center located in the state. However, the term seems to be expanding to include advertising that leads to sales in the state, or affiliate relationships with companies located in those states. You may have noticed a change on any order you placed Amazon in recent years. Originally when orders were shipped, sales tax was not charged on invoices, however this policy was altered a few years ago when many states’ sales tax agencies passed legislation requiring tax to be collected by Amazon and remitted to the agencies directly. This came about because individuals and businesses were not paying the use tax for purchases on items shipped to them. According to tax law, any items subject to tax if purchased in a physical location in your state are subject to use tax if ordered online. This tax should be reported on a business’ sales tax return (if applicable) or income tax return. Upcoming changes entail what is considered “nexus” and if the way you operate is seen to have a significant presence, you may...

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