Thursday, March 20, 2014

Charging sales tax on Internet transactions

From the Sales Tax Institute.

You collect the tax for the state where the property is delivered to your customer. If the item is shipped to the customer, then tax applies for the delivery state. You should collect the tax only if you are registered to collect tax in that state. If the customer picks up the item at your location, tax should be collected for your state.

If you are selling goods over the Internet and your company has a presence in the state of delivery, your company has established nexus and will be required to register to collect sales tax on all taxable items regardless of method of order placement. Whether the order is placed over the Internet or through traditional means, if a company has nexus with the state in which the product is being shipped, sales tax should be billed and collected. For example, if a New York company ships to New York, there is nexus, and tax is collected. If the New York company ships out of New York, whether they collect sales tax or not depends on whether or not they have nexus with the state into which they are shipping.

If the retailer is located out-of-state and does not have a physical location or other type of physical representation in the state [nexus], the state cannot require the retailer to collect their sales tax. However, some out-of-state retailers voluntarily collect the tax as a convenience to their customers. If the retailer does not collect the sales tax, the purchaser has the obligation to pay the use tax directly to the state where the property is used as long as the item is taxable.

Re: out of state and sales tax with no nexus: It is the purchaser’s responsibility to self accrue and remit use tax. There is no sales tax obligation for your company if you have not established nexus.

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