Marketplace Fairness

Many small “ebiz” owners have questions about the “internet sales tax” and how it might impact their profits. The proposed legislation is called the Marketplace Fairness Act of 2013, and the 45 states that collect sales and use tax on goods and services will be affected.

Apparently the Federal Government trying to tell you that your US based internet business is responsible for collecting sales tax on everything you sell in the US, no matter what state your buyer lives in.

The legislation has little to do with “Fairness”, of course. It’s about collecting revenue.

In 1992 the United States Supreme Court decided that “no state may require retailers to collect sales taxes from online buyers unless the retailer has a physical presence in the taxing state”. In other words, paying tax to an entity that has no physical presence in the state you live in is not even legal.

Big-box retailers who push this legislation claim that they lose business unfairly because people shop online to avoid paying local sales taxes. That simply isn’t true. Consumers shop online for convenience, not to avoid paying tax. Look at the shipping and postal delivery rates these days- that’s certainly not stopping online sales!

Businesses netting under $1 million are exempt from this legislation. For businesses with over $1 million in sales will have to have to pay a tax service to do all this for them… or purchase and run 45 different software programs to figure out sales tax state by state.

 

Website and Marketing Services

There is no sales tax on advertising, inclusive of online marketing and website services. If you are the owner of a registered small business, advertising is one of those investments that may be claimed as a business expense on the income taxes you file every year.