Online sellers consider how to comply with sales tax ruling


Online sellers consider how to comply with sales tax ruling

By JOYCE M. ROSENBERG Associated Press 25 June 2018

NEW YORK (AP) -- While a Supreme Court ruling on sales taxes will create more obligations and expenses for many small online retailers, owners are already thinking about how they'll comply.

The decision allows states to require out-of-state businesses to collect sales tax from customers in other states — for example, a retailer in Utah who sells goods to a customer in New York would have to calculate and collect the New York sales tax. The ruling potentially means thousands of small businesses that never collected sales tax except in their home states will be responsible for tax in some 10,000 state and local jurisdictions nationwide.

The ruling has angered many small online retailers and advocates for small companies because it will increase their expenses, mostly from the cost of software and services to help sellers collect the taxes and send the money to state authorities. But brick-and-mortar retailers who have had to collect tax simply because they have a store, office or warehouse in a state say the court has leveled the playing field, as online retailers will no longer have an advantage created by tax-free shopping.

The decision overturned two decades-old Supreme Court decisions that allowed companies without a physical presence in a state to avoid collecting sales tax. The internet has changed retailing, and Justice Anthony Kennedy, who wrote the new decision, said, "each year, the physical presence rule becomes further removed from economic reality." Kennedy also noted the existence of software that "may make it easier for small businesses to cope" with compliance.

Some internet retailers are shrugging and making plans to adhere to the new rules.

"I'll do what needs to be done and get it taken care of," said Dave "Lando" Landis, owner of Rocker Rags, a New Mexico-based online seller of clothing with photos and logos of rock musicians. "It's not something that needs to be a panic situation."

Adrienne Kosewicz who pays $3,300 a year for tax compliance software in 26 states, expects that collecting tax nationwide will raise costs by a manageable 10 percent at her Seattle-based online business, Play It Safe World Toys.

The cost can be reduced for retailers who sell to customers in the 24 states that participate in the Streamlined Sales Tax Agreement, a plan aimed at simplifying tax collection. Under the agreement, retailers can use a sales tax compliance service of their choice without charge for transactions in the participating states, according to Craig Johnson, executive director of the Streamlined Sales Tax Governing Board.

There are still many unknowns. The ruling upheld a South Dakota law that exempts sellers with $100,000 or less in sales in the state. Other states are free to set their own thresholds, and it's not known what they might be or how long it would take for all the states to weigh in, says David Campbell, CEO of TaxCloud, a provider of tax compliance software. It's also not known if Congress might set a uniform ceiling that all states would have to adhere to.

Kosewicz says for her, sales may not reach the threshold in each state.

States also still must announce dates by which retailers must be in compliance, says Scott Peterson, a vice president at Avalara, a manufacturer of tax collection software. He suggests retailers consult with their accountants to determine the states where they should be in compliance.

The tax compliance software and services are designed to work with the programs retailers use to process their sales transactions. They are linked to databases that track tax rates in the 45 states that charge sales tax, and in the thousands of counties and municipalities that have their own taxes.


Comments

  1. Some properties, such as those owned by religious organizations or governments are completely exempt from paying property taxes.

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