Sales Tax for online business

[basslady13]

What is the name of your state (only U.S. law)? AR

I started a small business handcrafted jewelry and t shirts and traveled around my state to festivals. I have all the licenses and tax information for this part. I have just recently started a webstore. I contacted my state about collecting sales taxes on these sales. I was told I collect for each state seperately and pay them accordingly. I have done some research and there are many different articles. Some say you only charge and pay taxes to the state where you are phisically located. Can anyone tell me what is the correct way to handle this. If needed I can add the tax rate for each state as far as county and city taxes I am not sure if I can or should try to include those.

Thank you

 

[tranquility]

See:

Quill Corp. v. North Dakota, 504 US 298 (1992)

 

[FlyingRon]

Actually, you have to collect sales tax for each state which you have nexus. This is certainly any state you maintain a physical sales location. You'll have to check with the states you operate at festivals in and see if your presence there constitutes a nexus for them.

 

[FlyingRon]

To abstract Quill which might be daunting to the poster. The Supremes held that just because you ship (by mail or common carrier) and took orders via phone and mail from the state, you're not establishing a taxable nexus.

That lets you out of any state you don't maintain a physical presence or have agents or employees in the state taking orders or delivering products.

As I stated, the states that you operate in festivals (and you say you already know about collecting and paying taxes there) may consider you to have a nexus. Here in Virginia, it would depend how regularly you attended such festivals here.

 

[tranquility]

Quill is the law regarding what nexus is. The holding is not the key, but the discussion. While I'm sure there are some articles out there discussing nexus which would guide the OP in a more accessible way, Quill is the way the courts will decide the issue and will point out many of the ways he can get nexus in a state without actually being there.

Further, if the citation is searched (in quotes) along with "internet" and "sales" on google scholar, many cases discussing the specific issue can be found. Then, he can make a decision based on the actual factors of the individual states he operates in.

Or, he can go to a lawyer or tax professional who will do the same thing to determine what facts the answer "depends" upon.

 

[basslady13]

Thank You

I want to thank all of you for your input. I did some more research on google and found the Electronic Retailing Association. This seems to be a really hot topic right now. Some states are really pushing the issue and others are not. I have sent an email to the Association and am hoping they can give me a clear cut answer. If not, I believe I will contact each state's revenue office that I have sales from and ask them how they prefer to handle this situation. I would rather put in a lot of effort now than be sorry later.

I have ordered things online and some stores charge and some do not or they don't show it as a seperate line. They could be paying them from the cost of the product.

Thanks

 

[FlyingRon]

Quill is the law regarding what nexus is. The holding is not the key, but the discussion. While I'm sure there are some articles out there discussing nexus which would guide the OP in a more accessible way, Quill is the way the courts will decide the issue and will point out many of the ways he can get nexus in a state without actually being there.

But the OP is there, at least part of the time, when she operates a booth at a fair/expo. Quill won't get you out of that. Quill says that just because you communicate via common carrier, mail, or phone (and I'm sure internet would fall into this) doesn't give you a substantial nexus.

Virginia for example will establish nexus if you're regularly in the state doing business, delivering taxable goods by other than mail or common carrier, delivering advertising or similar materials via other than mail or common carrier, or has agents or employees selling goods physically within the state.

None of this is in contradiction to Quill.

Some states might be more or less stringement than Virginia. I stand by what I said, she needs to find out whether her festival business causes her to establish nexus for her internet business. Quill doesn't provide the answer here. The taxing authorities are usually glad to render a decision (though you're free to take them to court if you disagree on the constutionality of it).

 

[tranquility]

I don't disagree with you, that's why I put out the definition of nexus.

OP, such associations are a great resource and should guide you well. Remember though, they sometimes have an agenda which is not yours. What serves eBay is not the same as what serves you.

 

[davew128]

But the OP is there, at least part of the time, when she operates a booth at a fair/expo. Quill won't get you out of that. Quill says that just because you communicate via common carrier, mail, or phone (and I'm sure internet would fall into this) doesn't give you a substantial nexus.

Virginia for example will establish nexus if you're regularly in the state doing business, delivering taxable goods by other than mail or common carrier, delivering advertising or similar materials via other than mail or common carrier, or has agents or employees selling goods physically within the state.

None of this is in contradiction to Quill.

Some states might be more or less stringement than Virginia. I stand by what I said, she needs to find out whether her festival business causes her to establish nexus for her internet business. Quill doesn't provide the answer here. The taxing authorities are usually glad to render a decision (though you're free to take them to court if you disagree on the constutionality of it).

I'm with Ron on this. The casual trade show exceptions are usually shown in the case of income tax nexus, which is considered a higher nexus standard than sales tax. For an example of how far sales tax nexus has come relative to the OP's case, look to Colorado and pending legislation in California and the effect it had on Amazon.com.

 

[tranquility]

I am uncertain as to how either of you think your answer differs with me as I did not give an answer because I don't know the facts. I gave the information one would use to find the answer.

To put it out precisely:

1. Go to Google Scholar
2. Click the "Legal opinions and journals" selection
3. type:
"Quill Corp. v. North Dakota, 504 US 298" internet sales [state]
(Where [state] is replaced by the name of the state in question.)
4. Find appropriate cases for your fact situation. You might try additional search terms like "casual trade show" if you want, but that may limit things too much.

 

[FlyingRon]

I don't know why you keep harping on Quill. All Quill says was that ND couldn't invent a nexus for someone who never actually operated in ND except via interstate commerce (mail, common carriers, phone). North Dakota had asserted that they had nexus as they made the "climate" that allowed the sales and they dealt with having to support the seller via disposing of the thrown away catalogs, etc... even if the seller had no presence. This isn't the case if the business came into the state and sold things. The fact that they are selling things via the internet doesn't make those sales NOT subject to nexus established other ways.

My company has sales nexus in Virginia, Maryland, Massachusetts, and Montana because we maintain offices there and Minnesota because we have agents there who repackage our software. However, all sales are done online via the Virginia office, but since we do have nexus in the other states, we must collect sales tax for those states even though our offices there never conduct any business with the public.

 

[tranquility]

Quill "says" what nexus means. It was not a narrow ruling which dealt with those specific facts. It was a policy decision which has tied up states in knots trying to collect what they feel due them in out-of-state sales.

See also:
Quill: Ten Years After
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087787

Rethinking Tax Nexus and Apportionment: Voice, Exit and the Dormant Commerce Clause
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=334380

Paying Their Fair Share: The Hidden Lessons of Complete Auto and Quill
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1066422

The Constitutionality (and Futility) of Colorado's Amazon Law
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1583520

New York’s 'Amazon Law': Constitutional But Unwise
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1513351

Jurisdictional Limitations on State Claims to Abandoned Property
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=238077

for further discussion on what it "says".