Amazon Remote Seller’s Top 10 List of Sales Tax Issues
- Jul 6, 2012 | Susan McLain
Tax administrators are looking ahead and realizing there is an overwhelming burden that will crash down on states if an Internet sales tax bill passes Congress this year. At a recent Federation of Tax Administrators Annual Meeting, speakers “…emphasized the need for greater uniformity in state tax administration if state sales tax is ever to keep pace with the rapidly changing world of retailing.”
Rich Prem, Vice President of Indirect Taxes and Tax Reporting for Amazon.com notes, “…some states are greatly underestimating the level of new sellers that might come into their systems….” He mentions that some states may think they will add 100 or 200 new businesses to their registered sales tax collectors. However, Prem notes that it might be 20,000 and asks “Can your system handle that?”
Besides problems of capacity and bandwidth, Prem listed 10 top sales tax issues that will have impact if Internet sales tax legislation passes:
- Shipping and Handling is not handled consistently across state lines. Some states exempt these charges from additional sales tax while others tax.
- Gift sales or send sales—“Which tax applies when a customer in one state sends a gift to another state?”
- Product returns may or may not allow sales tax credit to be given to the seller.
- Sourcing – “If a retailer has three warehouses and two items ship from an out-of-state warehouse and one ships from an in-state warehouse, different rates could apply. A local tax could apply to the item shipped form in state, while no local tax is imposed on the items shipped from out of state.”
- Restocking fees – are they taxable? In which states? Under which circumstances? Will each state differ?
- Time zones – “Tax rates typically go into effect on a specific date at midnight. How does the change affect a remote seller in different time zones?”
- Using multiple systems to calculate tax – “If a remote vendor is selling items on eBay, Froogle, and Amazon’s platforms, tax calculations will be performed on three different systems. How should that data be managed for audit purposes?”
- Exemptions – how do remote sellers handle exemptions? How will the states educate?
- Other types of taxes and fees – “Remote sellers may need to collect fees such as California’s electronic waste fee, which is paid by the consumer at the time of purchase. Sometimes fees also apply to purchases of tires, batteries, cell phones, and automotive oil.”
With these considerations, the call came from experts that, “With pending federal legislation to provide states complying with simplification requirements the authority to require remote sellers to collect sales tax, the time to begin establishing centralized registration systems and clear guidance as to ‘what is and is not taxable,’ has clearly come.”