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 be required to collect and remit sales tax, and registration with the tax agency will be mandatory. Be prepared for these changes to potentially occur in the very near future.
