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Old 14th October 2005, 04:12 PM   #1
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Default Forget to collect sales tax? You might get sued.

Seen in the WSJ:
Online Retailer Skips Sales Tax? You Might Sue
October 14, 2005; Page B1

CHICAGO -- Like many shoppers, attorney Stephen Diamond buys lots of stuff online. But unlike other consumers, he sues retailers that don't charge him state and local sales taxes -- and is making a profit doing it.

Using a state whistle-blower law, Mr. Diamond since 2002 has filed about 95 suits in Cook County court here against retailers that failed to charge him taxes on Internet sales, alleging that they broke the law. In cases where the state of Illinois joins the suits and prevails, he is entitled to up to 25% of the financial damages, with the rest going to state coffers.
Yikes! Anyone know what the rules are? Or do they vary by state? Does the state you operate in have jurisdiction, or the state you ship to, or the state where the purchaser resides, or all three, or just some?

Double yikes!

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Old 14th October 2005, 04:36 PM   #2
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From what I have been told by my accountant and by the Franchise Tax Board here in California...I only have to collect sales tax if I'm shipping to another address IN the state of California. I am exempt from having to collect sales taxes from other states at this time. This is something that the government has been debating about for years now, but at this time there is no "federal" law about collecting taxes...

Hopefully others will be able to shed more light on this issue!

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Old 17th October 2005, 07:54 AM   #3
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If you ship a taxable item to someone in your state you are responsible for collecting the sales tax. Exemptions are allowed for people buying for resale who provide you with the proper form and sales tax account number, as well as some other state by state expemtions for political purposes. (Here in VA sales to working fishermen of items for their workboats, farmers for farm related items and manufacturing plants are exempt, again with the proper forms / numbers.)

In all states this includes sales made by you to others delivered within your state, either by you or an outside source.

Also, orders taken from someone outside your state, but delivered within your state are subject to be taxed by you.

Orders from someone within your state for delivery outside your state are not taxed.

Naturally, it's not quite that simple. Again, there are exemptions and special rules for example "wire service" affiliated florists have special rules in some states, where they are taking orders here for delivery there. But, for probably 99% of normal business the examples I used above apply in all states that collect sales taxes.

There is a drive by some state tax commissioners, or whatever title they have, to set up a uniform sales tax collection procedure but it is not what you would call "steamrollering" toward finalization. And some states are tightening up on collecting the proper tax for each individual taxing district, where different cities, counties or multijurisdictional authorities have seperate sales taxes, forcing online and mail/telephone sellers to collect the exact sales tax for the specific address they ship to. This is causing some real headaches in Ohio, from what I undertand.

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