The below is a guest post by Susan Mclain of Avalara.
“Amazon Law,” “Internet Sales Tax” and “Affiliates” are all common buzz words in the world of online retailers today. The conversation includes large Internet retailers such as Overstock, Amazon and eBay; big box stores with an Internet presence such as Walmart, Best Buy and Target; and states who are seeking to ensure their revenue matches their budgets.
But what does this all mean for your business?
Your Internet business has a sales tax collection requirement in every state where it has a physical presence (nexus), regardless of how much or how little you make.
Well, that can vary from state to state and has been part of the uproar being heard by Internet retailers throughout the U.S.
Some states define nexus as having a distribution center, warehouse or storefront in their state. Other states add using a vehicle to deliver goods to their state creates nexus. And still others have legislation that states any business with a sales person or relationship to an individual in the state where that individual receives compensation from the company creates nexus. The last definition is interpreted to mean “affiliate” or “associate” of a company.
Tracking each state’s legislation and keeping up with their differences can be a huge, non-income generating activity. In addition to recent state legislative efforts, Congress also seeks to simplify the issue with the Main Street Fairness Act (MSFA) of 2011, which would implement the standards set by the Streamlined Sales and Use Tax Agreement (SSUTA). But even if this national legislation passes, each state must comply with new rules and regulations to enable them to legally require Internet businesses to collect and remit sales tax.
Some legislation excludes businesses that make less than a specified amount. Unfortunately, each state has their own threshold defined for a small business exemption from sales tax collection duties. If your business does more than $20,000 in sales, you will need to verify whether you are required to collect and remit sales tax in each state where you do business to ensure you don’t miss an obligation. $20,000 or less of in-state sales is the lowest threshold we have seen so far.
Stay current with the state and national requirements of sales tax management using up-to-date technologies and the Internet. Your business relies on the Internet to survive―use the Internet to your advantage to reduce risk, increase customer satisfaction and remain compliant, while letting others share and carry the burden of tax research and data.