subject: E-commerce Site Internet Sales Tax System [print this page] E-commerce Site Internet Sales Tax System
Internet sales tax is fast becoming a very important part of an ecommerce business, but that hasn't always been the case. Back in the early days of ecommerce, consumers and retailers were both able to enjoy avoiding this tax. There were not a whole lot of regulations to speak of at the time and online shoppers have gotten used to not paying website sales tax. As a result, e-commerce businesses began growing exponentially.
Unfortunately the free ride is almost over. Many states are starting to crack down and cry foul over the loss of billions of dollars worth of tax revenue from past years. Retailers without a web presence are also arguing that online businesses have an unfair advantage, because they are not required to charge sales tax. Both parties are calling for a new national internet sales tax to be enacted.
As of now, most states only expect online retailers to collect internet sales tax from customers who reside in the same state as the physical location of their business. Some states have tighter regulations and count merchant account, distributor, warehouse, drop shipper and sales representative locations also. It is important to read the tax regulations of any state with the slightest link to your business. If you do not pay the applicable taxes, there will be consequences that could significantly hurt your business. Not only will you have to pay back the total amount you owe, you will also be fined interest and penalties for each year that you did not pay.
Follow this checklist to help you get started:
Review the regulations of each state that your business has any kind of involvement in and figure out whether or not you have to collect internet sales tax from customers of that state
Register to collect taxes in the state or states where applicable
Automatically collect website sales tax using a reliable e-commerce/shopping cart solution
File a tax return to the appropriate state(s) and include total proceeds with your return
There are many important features to look for when selecting an e-commerce solution capable of automatically collecting internet sales tax from select customers. They include:
Easy to use website sales tax wizard built into the store admin
Automatic calculation of tax amount during checkout
Simple setup which allows you to select tax percentage by state, county, zip code or country
Be able to mark down nontaxable products
Support Canadian tax system
Choose whether tax should be applied before or after discounts
Choose whether certain customers or customer groups are exempt from taxes
