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    17 Replies Latest reply on Jun 15, 2008 11:41 AM by MiLo_22.0899

    Am I required to charge sales tax in my on-line store?

    2sisters Wayfarer
      OK, I am ready to hit the "open for business' button on my on-line store. (This is an extension of my brick and mortar) My business is registered in New York State. I cannot find specific information on when I have to charge sales tax on my on-line sales and when I don't. It is my understanding that if a customer who resides in NY purchaes product form my NY based on-line store, that customer has to be charged the sales tax that I charge at my brick & mortar. Purchases made by someone in any other state or country do not get charged sales tax. This does make sense to me, especially since my on-line store is, for me, an extension of my store. It makes sense to me that beyond the borders of NY state, sales tax does not have to be collected, but I don't want to assume anything. I can't find any info regarding internet sales tax on the NYS sales tax web-site or in any publication that I can find. Can anyone point me in the right direction for solid info on this? I don't want any tax problems with NYS!! By the way, Thank you to all who responded to my first forum question. I received awesome advise and actually went with a suggested host by a forum member for my store!!
        • Re: Am I required to charge sales tax in my on-line store?
          WITrading Wayfarer
          Just a suggestion, you should contact a business lawyer and or a CPA.
          • Re: Am I required to charge sales tax in my on-line store?
            Lighthouse24 Ranger

            See NY State Dept. of Taxation and Finance Publication 750.

            You collect sales tax for products shipped to addresses in New York. The tax rate you use is the one that applies to the "point of delivery" (i.e., the address you ship to), not where your brick and mortar store is located.

            NY state sales tax is not collected on products sold and shipped to addresses outside NY state. However, NY has agreements with CT and NJ that allow (encourage) New York businesses to collect CT and NJ sales tax on products shipped to those states (in part, because the tax would technically be due anyway if the product was brought back to NY for use). Again, see Pub.750 for more details.

            Hope that explains what you needed to know. You mentioned that you received awesome advice after your first post, but I see that you didn't mark any of the responses as helpful. If they were, you might want to go back and do that and give credit where warranted.

            Good luck with your new on-line outlet!
            1 of 1 people found this helpful
              • Re: Am I required to charge sales tax in my on-line store?
                2sisters Wayfarer
                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!!
                  • Re: Am I required to charge sales tax in my on-line store?
                    Lighthouse24 Ranger

                    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.

                      • Re: Am I required to charge sales tax in my on-line store?
                        amspcs Ranger
                        Dear Lighthouse,

                        Re +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+,

                        I think you are absolutely correct. In all fairneses, thoough, I think what nMoncreif mean was that if the merchant fails to collect it and the state catches on, they'll hold the merchant responsible for coughing up the tax money. My experience is that the states don't much care where the money comes from as long as they get it.

                        Best regards,

                        AMSPCS
                  • Re: Am I required to charge sales tax in my on-line store?
                    Lighthouse24 Ranger
                    P.S. Here's the link to that publication:

                    http://www.tax.state.ny.us/pdf/publicatio
                    ns/sales/pub750_208.pdf
                    1 of 1 people found this helpful
                    • Re: Am I required to charge sales tax in my on-line store?
                      amspcs Ranger
                      I would concur that you need to consult a business attorney and CPA with your sales tax question.The website suggestion is also good, but it may or may not be properly understandable or interpreetable by non legal types. I can't speak specifically for New York, but I know in many areas there is a fair amount of interpretation involved with the question of when to and when not to charge sales tax. Enforcement b the state and/or local jurisdictions is another question. I'm not suggesting that you not comply with the laws of your state. I am saying I wouldn't put myself at a tremendous competitive disadvantage by charging sales tax on things my competitiors do not charge for.

                      Hope you don't mind, but I'd like to make a comment to you on another subject I am authoritative on, just in case you are not aware of this:
                      .
                      You mentioned that you are going to do e-commerce business on a website that is an extention of your brick-and-mortar business. Regarding your credit card processing merchant accountd, please make sure you have a separate merchant account designated as an "internet"merchant account, do NOT use the same 'retail' merchant account you use for your B&M business. Running internet sales on a retail account could cause you a great deal of grief and damage in a number of different ways. Just a word to the wise.

                      Good luck with your ecommerce business.

                      AMSPCS
                      amspcs@juno.com
                      www.MerchantServices-help.com
                      1 of 1 people found this helpful
                        • Re: Am I required to charge sales tax in my on-line store?
                          2sisters Wayfarer
                          Thank you for the advise. I am willing to listen to any advise I can get. Yes, I do have a separate merchant account for the on-line store and it is one that is an e-commerce payment gateway. (Authorize.net) I do a lot of internet purchases myself, personally, and I can't for the life of me figure out when and why I am taxed and when and why I am not. Thank you again. I do have a CPA that I can talk to.
                            • Re: Am I required to charge sales tax in my on-line store?
                              amspcs Ranger
                              Glad to have been of help. However, I think you are confusing terms as so many merchants do--to be sure it IS quite confusing..

                              Authorize.net is NOT a 'merchant account'. Authorize.net is a 'payment gateway'--two entirely separate things.
                              Your payment gateway is used in conjunction with a merchant account to facilitate secure credit card processing over the internet, but in and of itself it has nothing to do with, nor is it a substitute for, a merchant account. My guess is that you subscribed to Authorize.net and linked it to your existing merchant account, which is a big problem--you should have opened up an entirely new internet merchant account and linked that merchant account to your Authorize.net gateway. If you didn't, when your merchant account provider realizes that you are running internet transactions via a merchant account underwritten and approved as a merchant account, you are going to have a very big problem. If this is what you in fact have done. I suggest you correct the situation immediately. At the very least, contact your merchant account provider and make sure they understand that you are now conducting business via the internet in addition to face-to-face retail, then let them take it from there, in which case they can't claim they didn't know. If you run into any difficulties via this route, then it is time to seriously shop for an additional internet merchant account elsewhere. Good luck.

                              AMSPCS
                              amspcs@juno.com
                              www.MerchantServices-help.com
                                • Re: Am I required to charge sales tax in my on-line store?
                                  2sisters Wayfarer
                                  Thank you again! No, I did not make myself clear. I do have a seperate Merchant account for my on-line store. It is through a different bank/entity than my in-store merchant account. I actually had to think about it for a moment, but quickly realized that I was working with a new merchant account. I actually had so much difficulty getting in contact with my merchant account provider I use for in-store that I gave up and found someone else! My thought was to try and keep the two separate for financial management reasons as well.
                                    • Re: Am I required to charge sales tax in my on-line store?
                                      amspcs Ranger
                                      OK, very good. What I described is a mistake lots of merchants make, with serious consequences.

                                      Silly question if iyou don't mind: : If you had such trouble contacting your present B&M merchant provider, why do you continue to dobusiness with them? Heaven forbid, what if you ever need them for something
                                      important such as a chargeback issue, equipment problems, or whatever? What will you do when they ignore you then? Personally, I refuse to patronize people who take my money but refuse to offer service.

                                      AMSPCS
                                      amspcs@juno.com
                                      www.MerchantServices-help.com
                              • Re: Am I required to charge sales tax in my on-line store?
                                nMoncrief Adventurer
                                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
                                  • Re: Am I required to charge sales tax in my on-line store?
                                    amspcs Ranger
                                    EXCELLENT post from mMoncrief, especially the last paragraph. The ONLY place to get tax and legal advise is from professionals in those respective fields.

                                    The issue of sales tax liability interstate vs intrastate varies from state to state, even municipality to municipality. So the advise of any third party living elsewhere would be useless...you need to find out what the rules are where YOU live.

                                    What nMoncrief means by adjusting your prices to cover sales tax is to re-compute your overhead factor calculations and include projected tax payments as just another overhead expense. I wouldn't recommend just pulling a number like $1 out of thin air because it may or may not be the right number.

                                    One more thought: If you intend to 'eat' the sales tax as nMoncrief suggests (not a bad marketing idea), I think I might advertise "We pay the sales tax for you" instead of "Tax Free Purchases". Why go out of your way to attract the attention of the tax auditors?

                                    AMSPCS
                                    amspcs@juno.com
                                    www.MerchantServices-help.com
                                  • Re: Am I required to charge sales tax in my on-line store?
                                    Lighthouse24 Ranger

                                    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.
                                    • Re: Am I required to charge sales tax in my on-line store?
                                      NatOnline Tracker
                                      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/
                                      • Re: Am I required to charge sales tax in my on-line store?
                                        centralb Newbie
                                        Although it may be especially important to consult professionals on matters of legal or financial impact, it also helps to have a basic understanding of what's going on. Considering that even professionals get overwhelemd or provide services of varying quality and thoroughness, ot helps to at least be able to have maningful dialog with your CPA or lawyer -- and beyond that, to have some basis for assessing that the professional response is both relevant and complete. Keep in mind also that the region where new technologies meet old or changing laws has given many judges, lawyers, and accountants reason for pause. Moreover, voices of small businesses implementing and responding to current and pending laws is an important part of the dialog that informs change in the legal and tax systems.

                                         

                                        To that end, consider these links regarding the basis, legal status, and debate for charging online tax: