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Sunday, June 24, 2012

Sales Tax Issues for Remote Sellers

Rich Prem, VP Indirect Taxes and Tax Reporting for Amazon, shared a Top 10 list of issues remote sellers face. He shared it with BloombergBNA (6/22/12) and the Federation of Tax Administrators.  

Rich's list:
1. Shipping and handling
2. Taxability of gift sales or send sale
3. Product returns
4. Origin versus destination sourcing
5. Restocking fees
7. Time zones
8. Using multiple systems to calculate tax
9. Exemptions
10. Other types of taxes and fees
I encourage you to take a look at the list and its brief explanations for each item. Most of the items stem from differences among the states, such as which tax both handling and shipping, which tax neither and which tax one but not the other (such as California taxes handling but not shipping).

Rich points out that states should be considering these issues before any federal legislation is enacted that may cause a large increase in the number of sellers registering in a state and collecting sales tax.

There will be other issues as well, such as:
  • Registering correctly and knowing what rate is required when a state has varying rates among local jurisdictions.
  • Whether states should create some type of vendor reimbursement. Most online sales are via credit card and when sales tax is added to the bill, the seller has to pay a higher fee to the credit card company (as do Main Street retailers). So, a portion of the sales tax collected does end up paid by the seller to cover the fee. Plus there are additional administrative costs of collecting and remitting sales tax in several states, rather than in just one or a few states.
Some of the issues could be addressed by states providing very clear (Plain English) instructions for remote vendors on the state's website.  Also, if reporting can be consolidated onto one form, that should help. For example, Rich's last item notes that some states may have additional fees to be collected, such as for electronic waste.  Allowing sellers to report on fewer forms should be helpful.

What do you think? What should be added to Rich's list?  How might states address some of these issues?

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