Should I be charging sales tax on my site?
This article was originally written for ArrowQuick Solutions, a technology consultancy for small businesses.
One of the most confusing aspects of online commerce is sales tax. This is partially because the current tax codes (even for normal commerce) are complex and vary between geographic areas. The relative newness of online commerce also means that tax laws haven’t been well-defined and adapted for e-commerce yet.
Of course, certain things like business-to-business transactions or intangible services are not taxed anyway. Other products, like groceries and prescription drugs, are exempt and not subject to state and local taxes. But what about tangible consumer items?
If you have a physical (brick-and-mortar) presence in the same state as the consumer, then you must charge the appropriate sales tax. In some interpretations of the law a “presence” may include where your offices, warehouses, equipment, or personnel are located.
Legally, the consumer is the one responsible for paying taxes to the state government for items purchased online. (This is known as a “use tax”.) As you might imagine, this can be difficult to enforce because it relies on consumers to declare their purchases. Some states have started programs that allow vendors to share in the proceeds of sales taxes collected from buyers in other states, but for now the sales tax obligation for e-commerce is relatively simple.
(*As always, consult a lawyer for legal advice on your specific situation.)
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