New Sales Tax for online retailers coming.

[TRAVISROMINE]

I recently learned here that starting next July 21 states including Washington State will be required to collect a "destination" based sales tax. This is required for all online businesses in these 21 states apparently and more are soon to follow. I've received a notice recently that my company will have to somehow provide reports of all tax collected from all my customers buying online and which state it came from and goes to, etc. This will be a nightmare not only for sales but my small office staff here is freaking out about all the paperwork. The article in the Spokane Journal of Business says the states are doing this to "level the playing field" for the brick and mortar stores to compete with the online shops. Unfortunately my shop might not survive this wonderful new online business tax as we're run on a shoestring as it is. This will significantly hurt sales as our customers will now have to pay shipping as well as sales tax!
Here is a link to the Department of Revenue where they are telling us how it's going to be (http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/StreamlinedSalesTax.aspx).
PS. I don't remember voting for this particular bit of legislation. Who said this is ok?

[Janet Eccles]

I thought that was standard practice. Our company (TAPCO) has always collected tax based on the destination of the order, not the originating location. You still only need to charge tax if you have a physical presense in the state, as far as I know. Since I'm located in Wisconsin, this should not affect me.

[TRAVISROMINE]

We only have a presence in WA so we currently only charge tax for WA state sales in our brick and mortar and online. However this new tax will make my company keep track of all sales tax individually based on destination for ALL ONLINE SALES!!! My state has graciously made an offer to partially subsidize the cost of the expensive software I'll be required to use for the tax reporting. If you already collect tax on all your online orders you won't be affected but most of us don't have to charge tax unless we have a presence in the state. Currently this law isn't up for discussion and is scheduled for implementation July 08. If enough people can get together maybe it can be stopped? All online stores will take a hit to be sure, that is the intent!

[grassman]

Doesn't this have to do with just the county tax within the state itself? Not collecting tax for states outside of the one in which you have a physical presence.

It would mean collecting the county surtax for all Washington counties rather than charging tax based on the county you are located within.

Correct me if there's more to it.

[mmf]

We too are in WA State... from what I understand, we are going to be responsible for sales within the State of WA only, based on the local tax rate. So, if we sell something to somebody in Seattle, we have to collect sales tax based on Seattle's tax rate, and if we sell to somebody in Bellingham, WA, we have to collect tax based on Bellingham's rate. However we do not have to collect sales tax for sales to residents of, say, California. (Unless the customer lives in California, but has the product shipped to an address in the state of Washington...) It is still going to be a nightmare keeping track of tax rates based on individual WA towns. I am not sure how we will implement that easily. And how we will report it??? Someday it will go national, I'm sure. But for now at least I think we are still just responsible for WA state sales.

[mattseattle]

I'm in Seattle and my understanding it's only for shipping within Washington state and not to other states.

On the URL you posted it says this:

Effective July 1, 2008, retailers will need to collect local sales tax based on the destination of the shipment or delivery – “destination-based sales tax.”

This only affects shipments and deliveries to locations in Washington State.

so it's only within Washington state....

[mattseattle]

and if you go deeper into the website it has this:

What about deliveries to locations outside of Washington?

There is no change for deliveries outside of Washington. Washington’s sales tax does not apply on sales of goods when the seller delivers the goods to the buyer at a location outside the state.

[Roger]

It is my understanding that we, in WA state, have to start charging destination taxes for counties in WA, but next year, we will also have to do that with 21 other states. The states have made an agreement between themselves to enforce, in effect, an interstate commerce tax.

[mattseattle]

It is my understanding that we, in WA state, have to start charging destination taxes for counties in WA, but next year, we will also have to do that with 21 other states. The states have made an agreement between themselves to enforce, in effect, an interstate commerce tax.

Well if you watch the video on the DOR's website it specifically says that Washington state will start charging destination taxes effective July 2008 for purchases only in Washington state and does not effect any deliveries/shipments outside of Washington state. The only hint that it gives is this is the first step to transition to collecting taxes to items shipped outside WA state.

Here is text out of the letter - if anyone has information that shows that we have to start collecting out of states taxes please share as I don't see it.

---

Sales not affected
This change does not affect:
• wholesale sales, services, and sales of motor vehicles, trailers, semi-trailers, aircraft, watercraft, modular homes, and manufactured and mobile homes.
• deliveries or shipments outside the state; Washington sales tax is not charged on those sales.
• sales when customers take possession at the selling location.

Reason for the change
Washington businesses that collect sales tax are losing sales to out-of-state retailers that don’t charge sales tax, putting them at a competitive disadvantage.
A national effort, the Streamlined Sales and Use Tax Agreement, standardizes the way each state taxes goods so it’s easier for online and mail order retailers to collect sales tax. To join this national effort, Washington had to change its method for collecting local sales tax.

[mattseattle]

Here is one other piece of information I found:

The streamlining agreement DOES NOT require Washington retailers that sell products to customers outside Washington to begin collecting sales tax on those sales.

Washington companies can choose to register under SSUTA, but are not required to do so. If they voluntarily join, they will then be required to collect and remit sales tax on sales into states that are members of the Agreement.

[WhoaGirl]

It's already this way in Florida, and it's a nightmare. You have to weigh the server processing requirements of calculating tax based on zip code versus paying out of pocket for any discrepancies, since each Florida county has a different tax rate. And I believe they can change their tax rate yearly, so a yearly update is required.

A question for volusion: if more states implement this requirement in order to maximize tax revenue for the state, is there anything that can be done to make this easier for us merchants? I've read of online stores that build these huge zipcode-based tax tables to be in compliance, only to bring the server to its knees from the processing overhead.

[Songofsnow_books]

http://www.streamlinedsalestax.org/DOCUMENTS/SSTUA/SSUTA%20As%20Amended%2006-23-07.pdf

[ritchey]

My understanding of the rules is if you have a physical presence in a state, you are required to pay sales taxes (called Nexus). It is up to the receiving individual to actually pay the taxes currently. The problem has been all the different taxes paid around the US. That is why Amazon for example is very careful where they put their warehouses. Other companies are careful of even if they do a tradeshow in a state because of this or have sales people in that state. Or if they use a third party warehouse, which ones to use for locations to minimize sales tax.

States have been talking about getting their fair share of sales taxes by harmonizing taxes, but so far it's not happened. Borders online got caught in this, because of it's physical stores. Dell is now also charging sales tax and most bigger E-Commerce companies figure it is just a matter of time when this will happen.

Steamlined Sales Tax Project is voluntary (http://www.disco-tech.org/2007/01/strengthen_the_internet.html)for collecting sales taxes for out of state sales.

Now if you locate in a state that has no sales tax, such as Oregon, you are in really good shape! Some companies, such as CDW (http://www,cdw.com)a large computer reseller will tax all their customers because they are dealing with larger businesses that don't want to bother with being forced to pay sales taxes on items due to an audit by the local tax authority.

Older article (http://findarticles.com/p/articles/mi_m0DTI/is_9_27/ai_56027148) that has some good information. Now I understand why companies have warehouses in Oregon, Nevada, and West Virginia (no sales tax). This is another good quote There are 30,000 taxing jurisdictions that can require you to file as many as 6,500 different tax forms in the United States,

My guess/hope is the moratorium will be extended to 2011 past the elections, since neither party (http://www.usnews.com/blogs/news-desk/2007/10/5/democrats-warned-to-stop-internet-tax.html)wants to upset voters right before an Election.