Online biz owners, get ready. If you haven’t learned the horrors of multi-jurisdiction tax tables and rates you’re about to.
According to a recent article, the US Senate just had an overwhelming vote to support the upcoming “Marketplace Fairness Act” which will require e-commerce merchants to begin collecting sales tax in all states.
So far our tax law has required sales tax collection only in states where the business has a physical presence. This gets complicated when companies use distributors to dropship products to their customers; however. Some states are demanding that you pay sales tax to them even if you don’t have a business operating in that state, but use a distributor who does.
The good news? You probably will be exempt if you have less than $1 million in annual sales. The bad news? $1 million in gross sales is a tiny amount for many small-medium marketplace merchants. Since one of the hallmarks of online merchants in lower prices that also means lower margins. A company grossing over $1M in sales could easily only net $50K. This is not enough to pay a tax professional to collect and remit sales tax in every state.
For more info, read the article and express your thoughts here. How do you feel about being forced to collect and remit sales tax in a state where you don’t have a business?