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App development, Business Management & Operations, Internet Sales

ONLINE SALES RETAILERS COLLECTING SALES TAX: BECOMING A REALITY

On Cyber-Monday (December 2, 2013), the Supreme Court declined to hear an appeal brought by Amazon objecting to being required to collect sales tax charged by New York State for certain online retail sales. Previously I looked at the issue of what it means to sell over the Internet in all 50 states.  https://allrightsreservedblog.com/2010/09/30/selling-over-the-internet-may-require-knowing-the-law-in-all-50-states/ 

This latest development is a clarion call for small online retailers to pay attention.   Even though the sales tax war is now being fought by large online retailers and the states, the tide is moving closer to Congressional action to create a degree of uniformity.  It remains an open question as to what extent such sales tax collection requirements will reach down to small online retailers.

A majority of states now require online retailers to collect sales tax.  http://www.nolo.com/legal-encyclopedia/50-state-guide-internet-sales-tax-laws.html  However, given the constitutional requirement restricting governments from burdening interstate commerce, the states have employed a variety of approaches to enforce their respective sales tax laws, with varying degrees of success.   Conventional retail store operators and their advocates have long argued that they operate at a competitive disadvantage because sales tax collection requirements are not extended uniformly to online purveyors. Congress has heard this complaint.

This spring, the Senate cleared its version of The Marketplace Fairness Act with broad bi-partisan support and sent it to the House.   https://www.govtrack.us/congress/bills/113/s743/text  The House generated its own bill.  http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.684

            Both bills offer some relief for small online operators.  However the small seller exception is defined as applying to those remote sellers whose gross annual sales receipts in the United States in the proceeding calendar year did not exceed $1 million.  Is this a fair and appropriate threshold?  Should the bills provide for an inflation factor adjustment to this base amount?

While any action is unlikely in 2013, the 113th Congress has another year in session.  If you run a small online retail operation, you should follow developments closely. You may also want to let your Congressional representative know about your interests and views on this issue.

About Law Office of Barbara I. Berschler

In addition to advising my clients about general business matters associated with business formation and operation, I counsel for-profit and not-for-profit organizations about the protection and use of intellectual property.

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