Just last week, the Senate approved the Marketplace Fairness Act making online retailers who generate more than one million dollars in out-of-state sales, liable to collect and pay state income taxes. A Wired article’s title “Internet Sales Tax Passes – Tax Lawyers Get Ready to Go Boat Shopping“ caught my attention, because I too believe the complications of this new tax collection will prove too much for online retailers. The Wired article mentions provisions included in the bill that intend to lessen the pain for small businesses:
- Free tax software.
- States will be required to set up a single agency that manages all sales tax issues related to what is referred to as “remote sales.” Businesses will not be forced to deal separately with cities that have their own sales tax rates.
- Sellers are exempt from any liability due to software mistakes or the state.
The Wired article highlights many of the same tax issues I raised in a previous Tax Resolution University post, about the Marketplace Fairness Act as it was passing through the Senate, namely the increases in audits and legal issues due to non-compliance.
Online shopping is no longer unique. Even brick and mortar stores including large retailers have online “stores” that do a brisk business. This fact makes the government eager to define and correctly address the e-commerce marketplace including how it should be taxed. While states may clamor for the tax dollars, they must walk a fine line so as not to discourage companies from doing business in or with their respective states.
As I stated in a previous article written on virtual business tax issues, I see a bumpy transition ahead for online retailers. I also anticipate increases in tax audits and lawsuits as overwhelmed e-commerce businesses attempt to keep up with new sales tax compliance requirements and the complex tax code. E-commerce businesses will need to make sure they have a qualified tax professional on their side to help them prevent any and all tax compliance issues that could result in a business audit.
Tax Audit Defense Membership Plans Can Help – A pre-paid Tax Audit Defense membership plan is a smart and prudent way to have tax audit experts available to you when you need them. Plans are affordable too. A pre-paid audit defense membership plans start at just $9.99 a month. The audit experts handle the bureaucracy and paperwork so that you don’t need to. In fact, Tax Audit Defense clients rarely even speak with the IRS! Members just simply forward audit notification and they handle the whole process from A to Z.
Additional sources:
Huffington Post – http://www.huffingtonpost.com/deborah-sweeney/will-the-marketplace-fair_b_3274601.html
Taxing Virtual Businesses and Their Investors and the Law: The E-Commerce Conundrum - http://www.articlesbase.com/taxes-articles/taxing-virtual-businesses-and-their-investors-and-the-law-the-e-commerce-conundrum-5854098.html