Whether you charge your customers a sales tax, depends on the state your business is located and the state where your buyer is located. Some states do not charge sales tax, but the vast majority do enforce sales tax laws. If an online retailer is physically present in a state that charges a sales tax, then that business is required to charge its customers who reside in that same state, a sales tax.
In contrast, if one of your customers resides in a different state, you are not required to collect sales tax from that particular customer. If your business were to expand to another state and you sell product to customers in your new state, you would then be required to charge sales tax. Even if your business were to only open a warehouse to supply customers in the new state, you would still be required to charge sales tax.
Though online businesses may advertise that their items are free from sales tax, there are many instances when they are indeed subject to sales tax.
If I Bought a Product Over the Internet and Was Not Charged a Sales Tax, Do I Still Have an Obligation to Pay the State for the Tax?
If you bought something online and did not pay sales tax, you do have an obligation to pay the state a “use” tax. Use tax is similar to sales tax, with the exception that use tax is paid directly to the state rather than the online retailer. Legally, this is required of all consumer goods, but states typically make an effort to only collect on high-dollar products that require a license, such as a car or boat.
Currently, only five states do not collect sales tax. Recently reintroduced to Congress, the Marketplace Fairness Act could force online retailers to charge sales tax on all internet purchases. Under this proposed legislation, states would be able to tax across their borders, and businesses would then have to collect these taxes and report them to dozens of states.
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If I Have a Problem or Am Confused as to Whether I Should be Collecting a Sales Tax for Consumer Goods Sold Through My Online Business, Where Can I Seek Help?
Sales tax can be confusing, especially when it comes to online retail sales. If you have any questions regarding your own business and whether you should be collecting sales tax, it is a good idea to speak with a tax attorney.
Cyberspace laws change frequently as more businesses are evolving and turning to the internet for sales growth. Your lawyer will be able to advise you on how to stay compliant with tax laws by keeping your business on the level in cyberspace.