ForumsInternet/eCommerce

Thank you so much, this is exactly was looking for and I will also call my CPA for further advise. You responded to my first Forum posting about a month ago and your response then was equally as helpful. I have gone back and indicated helpful answers. Thanks again!!

I ran an ecommerce business for seven years, and like you, I also had a small retail store. Mine was in Georgia, though, so take that into consideration. My CPA explained the sales tax question in lamen's terms like this: The merchant is required to pay sales tax on all sales that are completed in the merchant's state, or in any state where the merchant has a physical presence. For e-commerce, "completed" means the shipping address must be in the merchant's state. So if your only physical location is in NY, you'd only pay taxes on orders shipped to NY. If you had a small outlet in FL, you'd pay sales tax to all orders shipped to either NY or FL. If you've ever ordered from a catalog, you may have seen order forms that listed 10 or 12 states as taxable. It's because that merchant either had a business office or outlets there.

Like amspcs said, you could put yourself at a disadvantage by charging tax to your NY customers, especially if your competitors don't charge it. That's up to you. Remember that your customer isn't the one required to pay the tax; it's you. What you might do is calculate what percentage of your customers live in NY, then increase your prices across the board by enough (maybe 1%) to cover those NY taxes due. Then you can advertise "Tax Free Purchases" for all customers and stay out of debtor's prison, too.

Remember that free advice in tax matters should always be double-checked with your local CPA. None of us will be willing to go to court with you! Good luck.

Neil Moncrief
www.CreekFinancial.com

2sisters, thanks for the acknowledgment -- glad I could help.

I have to respectfully disagree with "your customer isn't the one required to pay the tax; it's you" -- actually it IS the customer that's required to pay it, and as a merchant, you are required to collect it for taxable items on the state's behalf. Advertising "tax free purchases" other than on tax-free items or at times that your state allows tax free sales (e.g., the weekend before school starts in some states) is illegal.

Most states are all over the fact that Internet businesses within their borders are not charging sales tax properly, and that a lot of state revenue is being lost as a result -- and large states like NY, CA, TX, and OH have formed sizable task forces to identify the offending companies and go after back taxes due and penalties. In my view, you are very smart to want to set this up correctly from the outset.

Best wishes.

The state understands that you, as a merchant, are collecting their tax for them -- and they do NOT expect you to have to pay for professional advice from a CPA or attorney on how to do it. As you probably know (since you run a brick-and-mortar store already), there's free on-line tax rate lookup, free bulletins, a free business answer center, and free sales tax seminars in your state. If the answer I provided, the publication I referenced, and the NY Department of Taxation and Finance website left you with pending questions, please contact the department's Taxpayer Answer Center and get the answers from them -- for FREE.

2sisters,

You don't have to charge sales tax for ouside state customers. You must not promote that out state customers will not pay sales tax on your e-commerce.

There is a big law suit between the state of NY and Amazon.com about collecting sales tax, because online stores and brick and mortar stores from NY are selling their good on Amazon.com, then Amazon don't charge sales state in NY because they don't have a physical address in this state.

I really don't know who will win...

Here more information:
http://bits.blogs.nytimes.com/2008/05/01/
amazon-sues-new-york-state-to-void-sales-t
ax-rules/