USA Online Sales Tax: Question

[ROBERTwalter]

Working For a sporting goods company located in NY.

Obscure question regarding sales tax online. Company outsources its online teamsales to a company which is based in texas. My understanding of the law is any sale that originates outside of the state where a company holds a physical presence is void of sales tax.

Our Company provides the goods but since the sale is geographically processed outside of the state is it necessary to charge the final customer sales tax?

Just a curiosity!

Thanks!!

 

[Samir]

That's currently the way the law works, but it's changing.

With the advent of the Internet that's made interstate commerce much more feasible, the laws are being restructured to require companies to start collecting and remitting taxes for other states in which they do business. Companies that already do this will be ahead of the game when nationwide or federal legislation exists.

Some further reading:
Marketplace Fairness Act - Wikipedia, the free encyclopedia

For now, you have to know what the law is in that state, and sometimes even in each city and county! And for those purchasers of products that you do not collect sales tax for, many are required by law to file use tax.

 

[ROBERTwalter]

What about in regards to the technicality of the payments being processed through a third party vendor located in texas? By law do I need to be collecting the sales tax?

As an aside:
IMO The gov't is a long way from being able to manage the sheer data of cross border sales tax remittance. A company with no physical presence in the state of transaction currently has no reason to remit to that state. By what your saying a brick and mortar company which conducts its business from one state, faces the near impossibility of discerning between the separate states hyper-localized tax laws? To put that onus on the company doesn't make sense; but, it seems some tax law rarely does so you could be spot on.

 

[Samir]

What about in regards to the technicality of the payments being processed through a third party vendor located in texas? By law do I need to be collecting the sales tax?

As an aside:
IMO The gov't is a long way from being able to manage the sheer data of cross border sales tax remittance. A company with no physical presence in the state of transaction currently has no reason to remit to that state. By what your saying a brick and mortar company which conducts its business from one state, faces the near impossibility of discerning between the separate states hyper-localized tax laws? To put that onus on the company doesn't make sense; but, it seems some tax law rarely does so you could be spot on.

It depends on if the payments are being treated like they are a payment processor. If they are, you should be getting a 1009K from the company. If not, then they are not a payment processor and are selling the goods and should be collecting tax. That is, if the company isn't just a division of your NY company. If it's a division, then you may not need to collect sales tax, but this is subject to both NY and TX taxation laws on the state, county, and municipality level.

Yes, it is a royal mess of data, but that's where computers come in. I owned a auto parts distribution company at one point. I had to fill out monthly tax returns for over 48 different counties, cities, and the state! And this was just within one state! It took me 12 hrs to do it the first time. But after I built a spreadsheet to help me tally everything, I could do it in under an hour.

If my little spreadsheet became built-in to the systems that help track the sales in businesses (just like they already are for calculating sales taxes for fixed locations like retail), then the system will tell you what to remit. Couple that with most payment systems changing over to electronic, and the workflow isn't bad. Take it one step further, and the payments would remit directly everyday just like credit card processing. I can easily see this happening in under 10 years. Then the workload is gone.

 

[StatesSalesTax.com]

that salesteam in TX likely creates nexus in Texas for the NY company. If nexus is created, all sales into Texas must be charged sales tax.

(2) Engaged in business--A person is engaged in business in Texas if the person has nexus with the state as evidenced by, but not limited to, any of the following:
(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted;

We register and file sales tax returns in all states for privately held and publicly traded companies.