Designed primarily for catalog and Internet sales, the new multi-state Streamlined Sales Tax Agreement and the simplified sales tax rules agreed to by the state taxing authorities are already proving beneficial for many retailers. The incentives offered under this new multi-state pact:
- Easy signup,
- One-source to sign up with multiple states,
- Simplified rules,
- Discounts or commissions,
- And, in some cases, a unique amnesty program.
These incentives warrant attention by every powersports dealer doing business in more than one taxing jurisdiction.
ENTER THE FEDS. As already mentioned, retailers have been exempted from collecting taxes on sales in states where they do not have a physical presence since a 1992 Supreme Court case -- before the advent of e-commerce. Congress, in an effort to catch up, continues to introduce legislation (so far unsuccessfully) that would level the playing field between e-commerce and storefront retailers.
However, as the economic downturn has gouged ever-bigger holes in state budgets, Congress has been feeling the pressure. Three bills introduced in Congress during the past two years would allow states to collect sales tax from online sellers that have no physical presence there. Those bills have failed to pass. However, according to many experts, there appears to be a growing momentum for an online sales tax.
Congress has been considering the passage of The Marketplace Fairness Act, which would require all online retailers with more than $1 million in annual sales to collect sales taxes. If the bill giving all states the authority to collect sales tax from online retailers becomes law, an advantage enjoyed by sellers such as Amazon.com and Overstock.com, but not merchants with physical stores like Target.com, would come to an end.
If the Main Street Fairness Act ever passes,
e-commerce shoppers could see a 5-10% increase in the cost of online purchases, reports indicate.
Another proposed bill, the Main Street Fairness Act, encouraged states to simplify their sales and use tax systems with those that do allowed to require sellers to collect txes on sales of goods or services delivered in-state, without regard to the location of the seller. What’s more, this Act would “consent” to the Streamlined Sales and Use Tax Initiative as a guideline for achieving that basic equality and fairness.
If the bill ever passes, e-commerce shoppers could see an estimated 5 percent to 10 percent increase in the cost of their online purchases, according to reports. But taking away the no-sales-tax perk ultimately might not matter to online shoppers much: The big draws of e-commerce for its fans are the convenience and wide selection it offers -- not the tax free shopping, say some experts.
Supporters of online sales tax collection include Wal-Mart Stores Inc., Target Corp. and other big-box retailers who argue they are at a disadvantage against online-only competitors.
THE USE TAX. Many states have a “use tax” for situations when the seller is in a different taxing jurisdiction from the buyer. The tax is designed to ensure that all purchases are taxed, regardless of whether purchased locally of from out of state sellers.
Not too surprisingly, sales tax is still supposed to be paid. If the seller is not responsible, then the buyer is. In general, buyers are supposed to voluntarily file their own report and pay the standard tax on all out-of-state purchases. (continued)