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| Online Sales Taxes |
So you've started your online business and have your website up and going. Now you're wondering whether you should charge sales tax on the products your customers order.
The Internet Tax Freedom Act ("ITFA"), passed in 1998 and in effect until at least 2006, prevents new state taxes on electronic commerce that are discriminatory or result in multiple taxation.
But how do you decide whether a sales tax is owed under laws that were in effect prior to the passage of ITFA? And how do you make sure your buyer doesn't get taxed more than once on the same transaction?
The main determining factor is where you are in relation to where your customer is.
If you're in the same state as your customer, you'll need to collect sales tax and send it in to the appropriate state taxing agency.
If a customer in another state orders from you, you have to pay sales tax in that state only if you have an actual physical "presence" in that state, such as an office, warehouse, store or so forth.
Otherwise, it's the customer's responsibility to worry about sending what are dubbed "use" taxes on to their state's coffers.
Many large retailers with a physical presence in most states get around the sales tax dilemma by establishing separate companies for their online businesses.
If you decide you want to establish a separate business entity for your online business, you'll need an experienced corporate attorney on board from the very beginning. |
