The debate over internet sales tax may be relatively new, but the idea of states wanting to cash in on tax revenue on purchases from out of state vendors dates back to the days before many of us even had internet access.
In 1992, the controversy reached the Supreme Court in Quill Corp v North Dakota. But don’t Google (or Bing, for our Microsoft friends) “Quill” to find their e-commerce website just yet – Quill was a mail order reseller. For those under 30, yes, that’s how we used to order our music, books, clothes, etc. when we couldn’t find what we wanted locally!
The Supreme Court ruled that in order for a state to require a seller to collect sales tax, the seller had to have a “physical presence” in the state. The court drew the distinction between the so-called “Main Street” retailer, who had shops or offices in the state, and remote sellers. And the debate has since escalated, with Main Street companies claiming the remote sellers (first catalog , and now online retailers) have an unfair advantage because the price the consumer pays the remote sellers is lower since it doesn’t include tax.
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There are three federal bills currently under review dealing with internet sales tax, but some states are taking matters into their own hands and passing legislation. California recently enacted a law that expanded the circumstances in which internet retailers are required to collect sales tax. |
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One of the major targets of this legislation, of course, is Amazon.com. The internet giant has opposed this type of legislation for years, for obvious reasons. They’ve gone to great lengths to avoid the type of physical presence outlined in Quill. But as it turns out, it may just be an advantage for them as they can now open warehouses throughout the state, thereby lowering shipping costs and speeding up delivery times.
Sales tax legislation may just work out for Amazon after all, but what impact will it have on your business? Are you ready for internet sales tax? Do you know the challenges and risks associated with keeping abreast of the thousands of rate, rule, and boundary changes that occur in the U.S. every year? If not, now is the time to start planning, not when the auditor comes calling.
To learn more about how smart companies – both Main Street and Information Superhighway – are handling these challenges, watch “Sales Tax Automation: The Time Is Now”. Or contact the sales tax experts at Avalara.
Written by Darcy Boerio Channel Development Manager, Avalara
Darcy Boerio has more than 15 years experience working with Sage ERP products. Previous to joining Avalara, Darcy worked directly for Sage and Alliance Solutions Group, a top 100 VAR. Last year Sage North America announced that Alliance Solutions Group has earned the Sage North America Business Partner of the Year Award for 2011. The Business Partner of the Year honor is awarded to the top-ranked business partner for Sage for the company’s fiscal year 2011 from October 1, 2010 to September 30, 2011.