If you want to create confusion and anxiety, as Forbes reports a collection of 13 states desires to do, you can’t beat sales tax regulations.
The states in question are sick and tired of citizens and businesses shopping online and failing to pay the use tax which they are legally required to pay. You may think that your reams of copy paper are tax-free when you buy them with Amazon Business, but that’s not the case. Consumers are required to calculate that sales tax themselves and send it along to the state, just as you collect and remit sales taxes on behalf of your company.
Consumers don’t do this. Some estimates hold that about 2% of consumers do, but all accounts agree that the great majority of consumers, including businesses, do not. Consumers are accustomed to the convenience of having businesses collect that sales tax for them, and it’s not convenient to keep track of sales tax all year and send it in… so they don’t.
Some states have tried to simplify things for consumers by adding an estimate to the forms used to file income taxes, but that hasn’t done the trick.
At the same time, online sales tax bills continue to be proposed in Congress and then die in committee. Forbes reports that there have been half a dozen such bills stretching back to 1967, and the current version doesn’t look as though it’s going to do any better.
So a group of states have banded together to get the decision out of the legislative branch and into the courts. Forbes quotes Joe Garrett, deputy revenue commissioner in Alabama, saying this quite boldly: “We’re confident that some remote sellers will not comply and therefore it will lead to litigation.”
In other words, the states are making up their own online sales tax rules, knowing full well that it will be hard for remote sellers to comply with a whole bunch of different sets of regulations. So far, e-commerce companies that don’t want to deal with state sales tax rules have gone so far as to quit selling to customers in some states. If a large enough number of states take action, though, that option will become less appealing. Remote sellers will have to attempt to cope with the plethora of different rules and regulations. Some will give up and fail to comply. Some might even sue one of the states to try to get rid of the problem.
That will be the chance the coalition of states has been waiting for. A juicy lawsuit will result in a decision that they hope will force the federal government to make a national online sales tax law.
In the meantime, you may come up against this problem — even if you’re not a retailer. If you’re a manufacturer making some direct-to-consumer sales or taking orders directly from large customers without realizing that you’ve established nexus in their state (maybe by drop-shipping a package or attending a trade show), you might have to deal with it.
The coalition of states is out of patience, and they don’t care whom they inconvenience. In fact, they’re counting on inconveniencing enough people to get the attention of the courts.
Stay out of the fray and avoid that confusion and anxiety by using SalesTaxDataLINK to make accurate calculations and compliance easy. From enterprise software solutions to outsourced services, SalesTaxDataLINK has the right-size solutions for everyone.