Paying individual states for sales tax on items sold online

[wildmaven]

"In June 2018, the Supreme Court ruled that a state can require online sellers to collect sales tax, even if they do not have a physical presence in that state. Online sellers will have to register for a license and collect and remit sales taxes in all states that impose a sales tax where they satisfy the tax law’s nexus requirement."

Does that mean if someone has an Etsy account that sells to all 50 states in the US, they have to have a business license in ALL of those states and send the sales taxes to each state? Or am I reading that wrong?

[HoudiniDerek]

I think that you are interpreting it correctly, Wildmaven.

I could be wrong, but that's what it sounds like.

It might be only if you make over a certain amount of money too. Some programs aim to get taxes from large corporations like Amazon rather than the online artist that sells coffee mugs online. The fine print may not be out yet on how it will be implemented.

[Inkjet]

I’m no expert, but there’s also the chance that Etsy May collect and handle those taxes for the seller and you end up paying those taxes through fees associated with listing through Etsy.

[Derek‽]

It’s tricky.

What it means is that a state can legally require a business license and impose a sales tax on online goods from out-of-state vendors if they so choose. You wouldn’t need a license or to collect sales tax in all 50 states, just those that require it.

What makes it tricky is that each state will be able to define “nexus” differently. Broadly, a nexus is a business’ link to an area. It’s typically a physical presence, but not necessarily so anymore. If you make and sell crafts in California, you have a nexus in that state. If you send your products to a third-party distributor such as Amazon (when the product page says “Sold by BlahBlah, fulfilled by Amazon”), you might be satisfying the nexus requirements of any states in which Amazon chooses to house your products. And in yet other states, simply doing a sales volume above a certain threshold could create a legal nexus.

It’s complicated, it’s messy, and if we’re being totally honest: it’s going to be ignored by damn near everyone. The Supreme Court opened the floodgates, but all that was on the other side was a babbling brook.

[daniel]

This has been on the horizon, and continues to be really, for a long time. In short- taxes were owed on online retail purchases all along, but it was up to the customer to report it when they filed state taxes. This moves the emphasis back to the retailer.

What I see happening is that 3rd parties like payment processing companies will sort out how to add this to their services. So, the tiny little shop won't have to do the paperwork and such for 50 states and thousands of cities far and wide. Instead, the small company will hook into the service that does this for them- taking their fee of course.

[Bugme]

It is a reality. I have an eBay business and recieved a notification from eBay that they will handle the taxes for my sales. However, since each state charges different tax levels, my profits will not be consistent across the board as they were in the past. This will likely hinder if not kill small online businesses. I could rant and rave on but, nothing will change the outcome.

[wildmaven]

I don't think I could facepalm any harder if I tried.

[D]

Oct 18, 2019 4:55:01 GMT -8 Bugme said:

It is a reality. I have an eBay business and recieved a notification from eBay that they will handle the taxes for my sales. However, since each state charges different tax levels, my profits will not be consistent across the board as they were in the past. This will likely hinder if not kill small online businesses. I could rant and rave on but, nothing will change the outcome.

I'm outside of the U.S. but sell to a lot of U.S. customers and on all the platforms I sell on the state-specific tax has always been added on top of the final sale price and collected and processed by the marketplace itself, so hopefully it stays that way and doesn't eat into our margins. The global marketplaces like eBay, Etsy, Amazon etc. already deal with a lots of different national tax complexities so hopefully they can absorb the responsibility for these changes. I've certainly not had any notification from any marketplace advising me of any changes but it could be because in a European seller.