Sales Tax - Assessing & Charging Sales Taxes

[spiderweb]

Folks,

I need your help in making a determination of whether sales Tax on items purchased on my client's website purchased by respective customers from all 50 US States and territories must be assessed a sales tax on items purchased?

My client's company is registered/Licensed to conduct business in New York State and we are looking to file and pay sales taxes in NY for the first time.

We are at a loss as to how to treat this situation.

Your help is much appreciated.

Thanks to all in advance for your response.

[mcb39]

Generally, if the purchaser is not a New York Resident, where you collect the Sales Tax, they are on their honor to pay the sales tax to their state of residence. Here in Wisconsin, there is a line on the WI tax return where we are to report all purchases (on the internet or otherwise) where Sales Tax was not assessed. A good example is the ATX program. When I file my WI tax return, I calculate the 5.5% tax that I did not pay to other states and pay it along with my WI tax liability. That is how it works here, I don't know about other states. I know that this is a HUGE problem and that they want to create some kind of universal system where everybody who buys something out of state, pays the tax to that state. Good Luck with that! It is an honor system and lots of people don't have any honor. (Until they get audited).

[lsowers]

All items shipped outside of NY are not subject to collection on the NY sales tax. All items shipped inside NY are subject to sales tax. Don't forget about all of the different tax rates within NY.

[Accountant33]

Not on the original question, but..... This is a hot topic in many states because they're losing huge revenues for on-line sales. I hope separate rules will be established for on-line sales and collection based on the seller's resident state, without regard to in-state or out-of-state use. On-line we are virtual visitors; if we were visiting in the state we'd pay the tax (you don't get to argue o/s use when you're physically there in another state) so why not consider 'virtually' there the same way? I know registration of individuals would be a problem, but at least those making a business out of internet sales could be tagged at some point -there are tons of them.

[Don in Upstate NY]

... On-line we are virtual visitors; if we were visiting in the state we'd pay the tax (you don't get to argue o/s use when you're physically there in another state) ...

Actually you do get to argue (and not pay the sales tax) if you have your purchase shipped to your home state.

[jainen]

>>separate rules will be established for on-line sales and collection based on the seller's resident state<<

Some states are getting together with uniform collection procedures, but they are generally based on local law of the buyer rather than the seller. Seller-based plans would just result in on-line sellers all moving to Oregon, which has no sales tax. Not only would it be a loss of revenue for the other states, but it would give Oregon retailers an unfair price advantage over local stores. No local legislator is going to vote for that.

At least in California, use tax is due on everything that comes in, whether or not it was already subject to sales tax at the point of purchase. Supposedly there is some way to get credit for other state taxes, but nobody knows how to do that.

[taxxcpa]

It is not legal to charge tax on interstate commerce. However, if you have a representative in some state other than your base of operations, sales shipped to that state are taxable. States are trying hard to find some way to tax sales shipped into their state.

[jainen]

>>States are trying hard to find some way to tax sales shipped into their state.<<

I don't see what's so hard about that. California doesn't tax SALES in other states, even if the item is shipped into California. However, items used by a consumer within the state are subject to a USE tax.

[kcjenkins]

Jainen, what is hard is collecting it, when they have to rely on individuals to report and pay the tax with their tax returns. What the states want to do is figure out some legal way to make the sellers do the work for them, collecting and transmitting the taxes to them.

[jainen]

>>they have to rely on individuals to report and pay the tax with their tax returns<<

Well, I can't speak for your state, but here in California we are all completely honest about that. In fact, we always try to support the local businesses anyway unless some necessary product is not available. That's why California doesn't need to join the Streamlined Project at http://www.streamlinedsalestax.org/

[kcjenkins]

Ouch, I'm suffering from sarcasm overload!

Good one, Jainen.