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One thing is for sure about tax requirements for Internet sales: retailers do not have the whole story. A common misconception in running an online business is that sales taxes are not due on Internet transactions. This has actually never been the case. Sales and use taxes have always been due. The incorrect perceptions stem from a 1992 Supreme Court ruling that stated they will not enforce sales tax rules on online transactions, because it would impose an undue burden on the business to comply with as many as 7,400 taxing jurisdictions with every transaction. Without enforcement, there was no compliance. Things have changed, however, in the past 2 years. State taxing authorities have begun enforcing the rules. Borders.com and OfficeDepot found out the hard way via back-taxes with interest and fines imposed on them. In the latest effort to collect these taxes, states have banded together to create the Streamlined Sales Tax Agreement, or SST. The stated goals of SST are to make it easy for online storefronts to comply and to collect and pay sales tax to SST member states. To this end, member states, or those pursuing membership, have enacted legislation to change to destination-based sales tax collection, and to offer amnesty for business owners who volunteer to collect tax. Washington state is slated to join SST on July 1, 2008. Despite the widespread changes in online taxation, many online retailers are not planning any changes in how they collect. This could be an expensive mistake. Online retailers need to know that even simply continuing to collect tax at your "nexus" requires a change. That's because some states now define nexus as the place to which the seller is delivering the product or service. Washington businesses at minimum must begin collecting sales tax based on the ShipTo address (if shipping to a location in Washington) and not their business location. Businesses willing to make this change now can take advantage of an attractive offer from SST: Register to start collecting taxes and you receive amnesty for any back taxes you may not have collected since 1992! Incentives are dearly needed, as collecting taxes in multiple taxing authorities is not a happy prospect. Thankfully, e-commerce technology has made great strides since the early '90s. SST recognizes this and has certified three companies to shoulder the burden of sales tax calculation and collection. These companies offer myriad services to easily and completely bring any business into compliance. As mentioned elsewhere, Adhost has chosen to partner with Certified Service Provider Exactor to provide sales tax rate and reporting services for our e-commerce clients using CFWebstore and the Adhost Merchant software. If you would like more information, email exactor@adhost.com. For more information about SST, visit: Destination-based Sales Tax, Washington State Department of Revenue
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