Collecting Tax on On-Line Sales

The volume of business conducted over the Internet is skyrocketing.  And no wonder.  Small companies can easily reach around the world for business.  Sellers on eBay, who number in the millions, may have buyers in all 50 states and in numerous countries abroad, also.
Question: What are your sales tax obligations on on-line sales?

Sales Tax Collection

Today, 45 states and the District of Columbia have sales taxes-- only Alaska, Delaware, Montana, New Hampshire, and Oregon do not.  In addition, there are more than 7,500 counties, cities, towns, and other local jurisdictions that impose their own sales taxes.

Which ones must you know about?  In which jurisdiction are you obligated to collect taxes?

The general rule for sales tax collections is that you are responsible for collecting the tax on sales you make to buyers who are located within your state.  Generally, the state in which you are physically located is the jurisdiction with which you must contend.  But you may be considered to operate in more than one state–for instance, if you have a sales force working in another state.  Selling on-line does not, by itself, create a presence in another state that would subject you to sales tax obligations there.

Resale

While collecting sales tax and remitting it to the state is certainly a burden on business operations, there is a bright side--you do not have to pay any sales tax on items purchased for resale.
Note: Some resale certificates remain valid indefinitely, but some must be renewed.  For instance, in Florida, they are valid only for one year and must be renewed annually.

National Sales Tax?

Legislation was introduced in Congress last year to create a national sales tax to replace the current income tax system.  A 23% tax would be imposed on the purchase of new goods and services in the US. This tax would be in addition to any state-level sales taxes.  To date, there has been little progress on this bill.