If you sell products online, you need to be aware of some changes surrounding Internet sales tax. Here are some of the highlights of the law that you need to know to stay compliant and keep the IRS off of your back.
If You Only Sell Online…
You technically should be paying state sales tax, though there’s not currently much in the way to enforce this. Many e-commerce systems charge sales tax based on what state the customer is in, so see if yours does so.
If You Also Have a Storefront…
If, in addition to selling products online you also sell them through a physical location, you are required to collect applicable state and local sales tax from your customers.
There are States That are Exempt
If you live in Alaska, Hawaii, Delaware, New Hampshire, Oregon, or Montana, you’re exempt from paying sales tax. Also, most states have tax exemptions on specific items, like clothing and food.
All That Might Change
Lawmakers are still trying to figure out how to enforce charging sales tax for online companies. It’s a real challenge. The Marketplace Fairness Act is headed before Congress in an effort to even the playing field taxwise between brick-and-mortar stores and online ones, who aren’t consistently contributing to tax-funded government works as of now.
If passed, you might not be affected, since online sellers with less than $1,000,000 in remote sales annually will be exempt from collection requirements.
Find Out What Your State’s Requirements Are
If you use e-commerce software, it probably will calculate what amount of sales tax to charge. But if you want to know what the laws are in your state, visit this page: Internet Sales Tax: A 50-State Guide to State Laws.
Expect to see some changes on the horizon soon. With the flood of small businesses selling online, the government naturally will find a way to take its cut.