If you intend to sell online one thing you need to consider is if you need to collect sales tax.
ECommerce Sales Tax
Historically the Internet has taken a tax-free approach to online shopping outside of a state’s borders. In fact the lack of tax requirement has been one of the major benefits of purchasing online for many. That being said, some Internet sales do require sales tax, and even when a website doesn’t collect tax, the consumer is responsible to pay the unpaid sales tax to their state when filing their yearly taxes.
You can learn more about the tax laws for California at https://www.nolo.com/legal-encyclopedia/california-internet-sales-tax.html The way the current law reads is that an online retailer which has a physical presence in a state (store location, business office, or warehouse) must collect sales tax from customers in that state.
Consumers of California are legally required to pay the tax to the state even when an Internet retailer doesn’t collect it. In this case the sales tax is referred to as “use” tax (rather than sales tax). You can learn more about “Use” tax requirement at: https://www.ftb.ca.gov/forms/misc/988.pdf As you will see from the chart shown on the link, California only collects tax on big-ticket items.
Sales Tax Laws are Changing
The e-commerce sales tax bill, known as the Marketplace Fairness Act, successfully made its way through the Senate recently and is now awaiting a vote in the House of Representatives. If this bill becomes law, most e-commerce merchants will need to collect sales tax from their customers in the near future.
According to marketplacefairness.org, this bill would grant states the authority to require online and catalog retailers, otherwise known as remote sellers, to collect local sales tax at the time of purchases, and is intended to simplify the state tax codes to make compliance easier for retailers. If you are using a commercial shopping cart for your sales most will have tax rate integration collection already in place so compliance with the Marketplace Fairness Act should be relatively effortless.
Small Seller Tax Exemption
The Small Seller Exception exempts retailers who made less than $1 million of total remote sales in the United States within the preceding calendar year from tax collection requirements.
According to marketplacefairness.org, “Online retailers who do not qualify for the Small Seller Exception will be required to collect sales tax starting the first day of the calendar quarter that is at least 90 days after the date of enactment of the Marketplace Fairness Act.” This date, which could be as early as Oct. 1, 2013, will require sales tax collection for all sales shipped to the 22 states that are full members of the Streamlined Sales and Use Tax Agreement (SSUTA).
If the Marketplace Fairness Act passes, states will be required to provide free software to retailers for managing sales tax compliance.
