Wednesday, April 29, 2009

Taxing Problems for E-Merchants

I wrote a story for AuctionBytes that described a bill called the Main Street Fairness Act, which will be introduced in Congress in the next few weeks. One thing I didn't get a chance to mention in the story: the businesspeople I talked to say that they would be happy to collect sales tax on online purchases, as long as it is a simple flat tax. That way they won't have to conform to different schedules and requirements imposed by multiple taxing bodies such as cities, counties, and states.

According to Carla Yrjanson, vice president of tax research with Sabrix:

"Forty-five states, the District of Columbia, and local jurisdictions in Alaska impose sales and use tax. It has been estimated that the number of tax jurisdictions that impose tax is in excess of 7,600. Sabrix Tax Research continuously monitors over 13,000 tax authorities (state, county, city, and district) for changes to sales and use tax rates and changes to how goods and services are taxed. So far in 2009, we have documented over 340 sales and use tax rate changes and added over 131 new tax authorities. In addition to the challenges in keeping current on the rates and whether an item is exempt or not, it is also critical to stay current on how states determine which local jurisdictions can impose taxes on transactions that cross borders. We have a team of tax professionals tracking these changes on a daily basis. I can’t imagine how a small or mid-size business could cost effectively track these changes themselves without using a service such as the Sabrix Managed Tax Service."


Blogger tekgems said...

It seems pretty easy to me that eBay's company, Paypal, can work with a third-party like Sabrix to figure out how much sales tax a buyer pays based on the ship to address. Paypal collects the tax and sends the revenue to each state, city, and/or appropriate tax jurisdiction via Paypal. In turn, the jurisdiction pays a negotiated Paypal fee, while I only pay the Paypal fee on the order total less sales tax.

The state can receive their sales tax on a daily basis which is better than quarterly. In-state tax collection can occur as it has been or perhaps we can deduct our in-state from our quarterly filings.

Unfortunately, due to globalization and efficiencies of the Internets, buyers will start buying from abroad more often. This also means that international competition have an advantage since they do not have to collect sales tax. I know I will buy inventory and supplies from foreign businesses if out of state sales tax collection is enforced.

10:29 PM  

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