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?

Need to Fix Sales Tax Collection Problem

A headline in today's Chicago Sun Times is a good reminder of the need to address the issue of sales and use tax not getting collected on a lot of online shopping done by consumers. The story title - "Tax-free shopping doomed?" by Kyong M. Song (11/13/11).

There has never been tax-free shopping on the Internet. It has only seemed tax-free because most consumers do not know about the use tax or don't pay it. And, states have had difficulties enforcing it (and done little to really educate consumers about the use tax).

There are currently three bills in Congress calling for some way to get more remote vendors to collect the tax, which would be the easiest way for the states to collect it and for consumers (no need to track what use tax you owe if the vendor collected it from you).

For a quick summary of the three proposals, see "Federal Proposals" - here.

I am doubtful if anything will be passed this year unless Congress feels that it a necessary option to help states gain some revenues.

What do you think?