photo

Category Archives: Sales Tax

New Sales Tax Laws
(Amazon Sales Tax Law)




Go To Great Panes, Kathryn Maloney ©2011
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

I’ve seen lots of folks posting about the new California sales tax law and the same type of law in a few other states (like IL, AR CT, NC…), and there seems to be a lot of confusion–not unlike the confusion back in 2008 when NY instituted a similar law (read more about that here).

Hopefully this post will help keep you from getting caught up in the hype & put you at ease a bit.


In short:

Now that so much of our commerce is internet-based and many businesses have representatives in other states that work for them online, the states are reworking the laws so the burden of collecting & remitting sales tax on taxable transactions isn’t on the buyer, but is on the seller.

Most of these laws have both a transaction-allowance that excludes most small businesses from this responsibility and a requirement of a new type of physical presence in a state.

(For example, you’d need to both ship $10,000 in goods to NY addresses in a year and you’d need to be affiliated with a NY-presence that you pay commissions or fees to, like Etsy, before you’d need to worry about this.)


Here’s the main points folks seem to be unclear on:

  • This isn’t about a new tax. It’s tax that is already owed to the state on taxable purchases.

  • This is only about regulating who is responsible for collecting/remitting the existing taxes due to the state on “remote sales” (mail order sales, internet sales, phone sales).

  • This doesn’t mean you need to collect your state’s sales tax from buyers who are having items shipped to an out of state address.

  • This doesn’t mean you need to collect a different state’s sales tax from buyers who are having items shipped to an out of state address unless you ship a whole lot there and you pay commissions/fees to someone/a business in that state.


    • These new Amazon*sales tax laws are about re-defining/clarifying what a “business nexus” in a state is, because the current definition leaves a loophole that allows big businesses like Amazon to avoid collecting sales tax on taxable transactions even though they have representatives within that state who are referring folks to their website and receiving a commission for doing so.

    When the seller doesn’t collect sales tax on taxable transactions & the buyer does not remit use tax on those purchases, then the states aren’t getting the money they are due & money they need to properly function. This has left many states in a lurch for funding.

    A business nexus is most often defined as having a place of business in a state or having a representative (person) in a state that solicits for your business, but with the advent of the internet and online affiliations & sales, the rules of the game are changing.

    If you have business nexus in a state, generally you are required to register in that state for sales tax purposes, and you also need to remit sales tax to the state (or collect & remit, depending on the state’s laws). Now big businesses won’t be able to skate around that law by claiming no physical presence when they do indeed have people or a business in a state who represents them even if just online or through an affiliated business.


    If you are just realizing you should be collecting sales tax for your state, this post will help you find the info you need on your state’s website:

    US: Sales Tax & Business Registration
    Links to Official Government Websites


    *Amazon is suing NY over their new 2008 sales tax law to try and keep from being required to collect NY sales tax and that’s where the reference to Amazon tax laws comes in. Amazon has affiliates in New York and NY has re-defined nexus to include affiliates located in NY, which means under the new law Amazon must collect & remit NY sales tax on NY-shipped orders because they also ship more than $10,000 a year to NY addresses.

    Other states that have added similar laws have had their affiliates removed by Amazon so that Amazon doesn’t have to collect sales tax for those states until the NY lawsuit is settled (rather than Amazon suing every state who has created a similar new legal definition for a business nexus).



    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Add comment | July 17, 2011 - 10:43 am | GoTo

    What is Use Tax?




    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Many buyers think that their online purchases are tax exempt, but if their state has sales tax when they purchase locally, they might be mistaken. It’s a common misconception and states are starting to crack down on internet purchases.

    For states with sales tax there is generally a complimentary tax that buyers should be paying called use tax:


  • Use tax is owed by individuals & businesses for items purchased without having paid sales tax that would have had sales tax on it if bought locally. (In some states that also includes tax on the shipping.)

    • Ex: Bought a book online, but the seller didn’t collect sales tax like they would have if you bought it at the local book shop? You owe use tax to the state for that transaction.


  • Use tax is payable by the buyer directly to the state.

    • Many states now allow you to pay the use tax you owe on your state income tax forms in April. You can also you fill out a use tax form reporting the amount you spent that you didn’t pay sales tax on, and send a check with that form to the state with the money to cover the use tax due.


    Links to the forms to pay use tax for many states can be found on the forms & publications pages of your state’s website. Links to many of those are here: Sales Tax-Business Registration


  • Use tax is usually the same rate as sales tax.

    • If that book was $10.00 & your state (and perhaps local) sales tax is 8%, you would have paid $10.80 if you bought it locally. You probably need to remit $.80 as use tax to the state. It’s best to get the details from your state to be sure you are doing it right–some states also tax shipping costs.


  • Use tax is not a new tax–it has been around in most states for decades.

    • Use tax isn’t new, it’s just that until the internet most people didn’t do so much distance-purchasing, so the topic isn’t much talked about.


    In short…:


    Just because you bought it online doesn’t make your purchase tax exempt.

    Use tax is what you owe your state when you should have paid sales tax but didn’t. :)



    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Add comment | July 1, 2011 - 9:40 am | GoTo

    New NY Business Info Page

    I’ve grouped all the info I’ve posted for NY businesses in one easy to find place–find this page any time using the gold link on the right side of the page:

    NY Sales Tax & Business Registration


    If you need help with sales tax & business laws for 33 other states in the USA, please see here:

    US: Sales Tax & Business Registration
    Links to official state websites

    Don’t see your state? Leave a comment on that post and I’ll update it as soon as possible for you.


    GoToGreatPanes--glass coaster kit, stained glass sheild, hanging bat, celtic knot

    Add comment | February 16, 2011 - 11:23 am | GoTo

    Three more states added–KS, OH & IN


    The Sales Tax & Business Registration
    link page is up to 25 states now, just added:
    Indiana
    Kansas
    		 Ohio


    GoToGreatPanes' Etsy shop


    Add comment | September 16, 2010 - 8:31 pm | GoTo

    Have Trouble with Destination-based
    Sales Tax on Etsy?
    We do too.

    GoToGreatPanes' Etsy shop

    Go To Great Panes, Kathryn Maloney ©2010
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Etsy has updated their new sales tax feature so that it is at least as suitable for sellers as Paypal’s sales tax was which is great, but for some of us it’s still not usable.

    If you live in a state that has sales tax based on the buyer’s address (destination-based) and the rate is determined by political boundaries–like counties or cities–and not on 5 digit zip codes, you may still be stuck.

    Several states are set up this way including New York, Florida, South Carolina, Washington and others, and in these states some 5 digit zip codes cross county or city lines, meaning that two ship-to addresses in the same 5 digit zip code should be charged different sales tax rates.

    Neither Etsy nor Paypal is set up to accommodate this issue so in-state buyers must be billed manually by sellers registered in most of these states if you want your tax collected accurately and need the receipt to show the actual tax due & collected.

    Washington sellers are lucky–their state allows them a little lee-way when collecting sales tax through sites that aren’t set up to deal with the full 9 digit zip codes (see here for info) a few states have similar breaks for sellers, but many of us aren’t so lucky.

    If you are in the same position as we are and are wondering what to do, here’s the only way I can find to make collecting tax accurately work:

    1. Offer “other” as a payment option in your Etsy shop,
    2. ask in-state buyers to select “other” as the method of payment in your listings & shop policies, then
    3. send them an email invoice with the sales tax rate for their ship-to address: Sending a Paypal Invoice



    Go To Great Panes, Kathryn Maloney ©2010
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Add comment | September 16, 2010 - 8:17 pm | GoTo

    New states added & links updated: Sales Tax & Business Registration

    The Sales Tax & Business Registration link page is up to 22 states now, & new links have been posted for some of the states that were already there:


    Alabama Arizona
    California Colorado
    Connecticut Florida
    Illinois Kentucky
    Louisiana Massachusetts
    Michigan Minnesota
    New Jersey New Mexico
    New York North Carolina
    Pennsylvania South Carolina
    Tennessee Texas
    Washington Wisconsin


    If a state isn’t there and you’d like to see links please leave a comment with the state and I’ll add it to the top of my list!





    7 comments | September 9, 2010 - 9:56 pm | GoTo

    Sales Tax & Business Page–updated with more states

    I’ve updated the new Sales Tax & Business Registration link page–we’ve now got info for these states too:

    Colorado
    Tennessee
    Texas

    If a state isn’t there and you’d like to see links please leave a comment with the state and I’ll add it to the top of my list!


    2 comments | September 3, 2010 - 3:33 pm | GoTo

    Sales Tax & Business Page–updated with more states

    I’ve updated the new Sales Tax & Business Registration link page–we’ve now got info for the following states:


    Alabama
    Arizona
    California
    Connecticut
    Florida
    Illinois
    Kentucky
    Louisiana
    Massachusetts
    Michigan
    New York
    North Carolina
    Pennsylvania
    South Carolina
    Washington
    Wisconsin

    If a state isn’t there and you’d like to see links please leave a comment with the state and I’ll add it to the top of my list!

    Add comment | August 30, 2010 - 1:37 am | GoTo

    New: Sales Tax & Business Registration Page

    Well I’ve been meaning to do this for the past few years and now that Etsy is trying to add a sales tax feature to the site there’s been an even greater need for info on sales tax & business registration requirements.

    I’ve got a hundred or so links bookmarked for sales tax issues in many states that have come up in the Etsy forums and I’m putting them up on the blog’s new:

    Sales Tax and Business Registration Page

    So far I’ve got info for only 10 states up, but I’ll be adding to the page as much as possible. If your state isn’t there yet and you’d like to see some links for it, please leave a comment on this post with your state and I’ll put your state at the top of the list for states to be added.

    I’ve got direct links to answers many of the frequently asked questions from the forums–links that take you to official government pages because I believe you should only get your answers from the authorities.

    Any other place you get answers–be it forums or unofficial websites–may or may not have accurate answers, and that’s just not good enough if you want to be obeying the law.

    This post from 2008 should still prove very useful in your quest for information–it lets you know what questions are asked repeatedly by sellers, so finding out your state’s answers to these questions should help you understand issues you may not have faced yet, so you’ll be prepared to handle them when they arise:

    Sales Tax Questions
    You Need to Know the Answers To

    Here’s to everyone getting legal!



    Etsy
    GoTo

    2 comments | August 27, 2010 - 2:31 pm | GoTo

    Download Your Paypal History


    Visit our Etsy shop: GoTo
    Go To Great Panes, Kathryn Maloney ©2010
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Looking for your Paypal fees history or sales tax you collected through Paypal? It’s all in the history download from Paypal!

    To download your history:

    1. Log in to your Paypal account & hover over the History link, click the Download History link from the pop up menu.



    2. On the right there’s a box with links, click Customize Download Fields.

    That allows you to control the information you get & how you get it. Be sure to select shipping amount, insurance amount, sales tax and any other information you need. Click save at the bottom of that page.

    I like to download it all and save it for my business records.



    3. Select Custom Date Range and put in the dates you need records from.

    If you have hundreds of transactions during the time frame you select you may have to change the dates and download a few months at a time so the download won’t time out.



    4. From the drop down File Types for Download menu select Tab Delimited.

    I like the all activity version.



    5. At the bottom click the “Download History” button.



    6. When download box pops up click to save the file to your computer.

    We have a folder where we keep all our business transactions, I save it there, some folks save items to “My Documents”, wherever you’ll be able to find it is fine. I give it a name that reflects the contents and the date range, for example my March 2010 file name will be: PP history 03 10.txt



    7. Once you’ve saved the file, go to the folder on your computer where you saved it and change the file extension from .txt to .xls so that Excel can open it and will automatically put all the data in separate columns for you.

    To change the extension right click on the file name and select rename, edit it then hit enter (on a Mac, use ctrl + click for the right click):

    From: PP history 03 10.txt
    To: PP history 03 10.xls



    8. Double-click the file name to open it. All your transaction data should be there now, separated into individual columns.



    To add up a column, for example, your sales tax:

    9. Click once on the first sales tax collected entry–that selects that box (I’m not sure what the column header is as we can’t use Paypal to accurately collect NY sales tax so our file doesn’t have that column).



    10. Hold down the shift key and then hold down the down-arrow key to highlight the cells until you reach the end of the numbers you want to add, then click the down arrow one more time, highlighting one empty box at the end of the column. It should look like this:



    11. At the top of the page click the big funny looking E in the menu bar–that will “auto-sum” the column. It will put the total in the empty box you highlighted at the bottom of the column. It should look like this:



    12. All added up! In this example the total was $3.75.



    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.



    Visit our Etsy shop: GoTo
    Go To Great Panes, Kathryn Maloney ©2010

    3 comments | March 25, 2010 - 10:42 pm | GoTo