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National Enforcement of Sales Tax?

| April 30, 2013
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Earlier this month President Obama backed a measure to empower U.S. states to require online, out-of-state, retailers to collect and remit sales tax on out of state purchases, before the bill cleared the final procedural hurdle Senate on April 22nd.

Under these new measures, any online retailers that accumulate $1 million dollars or more in annual out of state sales will be subject to the authority of states to collect sales tax on items shipped into the state; however the bill does not require the states to assert this authority.

Since retailers such as Amazon and eBay don't collect sales tax in states where they have no physical presence or nexus, it provides them an advantage to traditional brick and mortar retailers such as Wal-Mart and Target, and aids in the further decline of local businesses. Under our current law, states can only mandate that online merchants with physical stores or affiliates within state borders collect sales tax. (There has historically been a complementary tax to sales tax called use tax which obligates the purchaser to pay ?sales tax? directly to the state on items they did not pay income tax on. In Texas you can do so by filing form 01-156. Historically the individual compliance rate is close to zero since very few know about this and there is little to no enforcement.)

Remarkably, Amazon has conceded its exemption "in principle" and is ready to surrender to collecting and remitting these taxes they felt fortunate enough to have avoided for the better part of twenty years. Doing so will allow them to open numerous warehouses anywhere they please without having to battle state-by-state over their physical presence.

If you are considering starting an online business and have concerns or questions over this new legislation, please feel free to give us a call or make an appointment to stop by. At Rosenhouse Group PC we have the knowledge and tools you need to mitigate the range of tax liabilities that will undoubtedly burden our up and coming generations of entrepreneurs.

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