Internet Sales Tax?
January 10, 2008 1:38 PM   Subscribe

I know you're not my accountant but... the small company I work for wants to set up an e-commerce area on our website to sell books. We're just talking about one or two specialized titles at the moment to just a few customers. Now the question of Internet sales tax has arisen.

We set up a storefront using a hosted shopping cart solution that includes shipping costs, inventory checks etc. So now I am being asked "should we charge sales tax?" I am pretty certain that when I buy anything off the internet I have never been charged sales tax unless the seller is located in my state and so I have offered that as my opinion.

However our accounting person has taken the stance that this is inter-state commerce and because we have offices (mostly just of one employee) in different states we could be liable for charging sales tax regardless of where the buyer is located. We are a pretty small company but obviously want to stay out of IRS related problems, so is there something on the web about this that I can show or quote to interested parties and so prevent the possible sh*t-storm that seems to brewing?
posted by worker_bee to Law & Government (3 answers total)
My understanding, which comes from talking to accountants in the process of creating several online stores for various companies, is that you must collect sales tax and remit it to any state which you have a physical location.

Are these employees operating offices in those other states or just telecommuting? Is the business itself registered to operate in those states? Here's an article with an overview that also matches my experience of what's required.

If your accountant is knowledgeable in this area and says you need to do it then you should do it.
posted by voidcontext at 1:48 PM on January 10, 2008

My understanding ... is that you must collect sales tax and remit it to any state which you have a physical location.

Having worked at companies that develop and run online stores, I have been told the same thing with the same wording - you have to collect sales tax for "any state in which you have a physical location." I don't have an official citation for it, but I'm here to recommend that you look for official support of that side of the argument, rather than spend any time trying to refute it.
posted by vytae at 2:13 PM on January 10, 2008

Best answer: Quill v. North Dakota - the bright line test for nexus (the right for a state to impose a sales tax collection obligation) is physical presence. More on internet taxes.

For those states in which you have nexus, you will want to make sure that the state imposes a sales tax on such digital goods. Some will not.
posted by probablysteve at 4:09 PM on January 10, 2008

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