Thursday, January 12, 2006

Here comes the taxman

Somewhere around the end of January the W-2s and 1099s start to roll in. A sure sign that tax time here.

As an online merchant, we have been spared sales tax collections on any purchase that originates outside of Florida. Multiply that situation by the millions of online merchants and billions of online purchases and you can imagine the zillions of dollars in sales taxes that are not flowing into most state's coffers.

This makes the state treasurers mad. If these purchases were being made in bricks and sticks stores, the state would be getting its cut.

Without moralizing about whether the states have those taxes coming or not, they clearly could use the money.

So, guess what. They are working on ways to collect it.

To date the states have been unable to collect tax on out-of-state purchases because the law says they can't force a merchant in another state to collect their tax. Unless there is a nexus. That is, if you buy from a merchant that has a branch in your state, even if you are purchasing from a store or warehouse in another state, they must collect the tax for the state in which you reside and transmit it to that state.

Now, several states have entered into an agreement with the objective of reciprocating on sales tax collections. One state says, if you require merchants in your state to collect tax on sales from people in my state, I will do the same on merchants in my state when it comes to purchases by residents of your state.

Of course, one of the problems with this is that many states have local options that allow counties or cities in the state to add a local sales tax. With thousands of different taxing districts, how can a merchant be expected to keep track? Well, first of all there is computer software that can do it with some degree of accuracy. But who programs it and who pays for the software?

More ominous for those of us who pay our taxes but don't want to pay any more than we legally have to, there are rumbles of a national sales tax, the proceeds of which would be divvied up between the resident states/cities of the purchasers.

If you are one of those people who shops on the internet or through catalogs to save on the taxes (even though you must pay an almost equal amount for shipping), be prepared for the coming age when you will pay for both.

We don't worry about this much because the categories of goods we sell are one of kind. People buy from our web sites - ; ; ; and - because they can't find exactly what we sell anywhere else. Similar, perhaps. But not exactly the same. And, since we don't have store expenses, we can resell at lower prices, passing the savings on to buyers. Check us out. You'll see what we mean.

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