Online Selling, Sales Tax, and Your Oregon Business
- Sales Tax
- September 11, 2015 | Stephanie Faris
As one of five states with no sales tax, Oregon gives its residents a break when purchasing everything from groceries to new cars. For online businesses, sales work similarly to the way they do in a brick-and-mortar store. Whether a customer is located in Oregon or one of the other four states that do have sales tax laws in place, Oregon ecommerce businesses are not required to collect sales tax on that sale.
A long-standing federal bill seeks to change that. The Marketplace Fairness Act (MFA) hopes to level the playing field for local retailers by requiring Internet businesses to collect sales tax on every purchase. Oregon is currently one of more than half of all US states that have not streamlined sales tax laws to move the act to the next phase. As it stands currently, an Oregon business can sell to buyers in other states online without collecting and paying sales tax to that state.
Over the years, the MFA has been unsuccessfully introduced as a federal bill several times. Setting nationwide sales tax regulations on online sales is difficult when so many states have differing laws. Additionally, each time the bill is introduced it brings concerns that it would harm small businesses that rely on online sales to out-of-state customers to remain in business. In a state like Oregon, where sales tax isn’t collected from customers at all, businesses will then be required to charges sales tax to out-of-state customers based on those states’ laws.
In June, the issue was rejuvenated yet again with the introduction of the Remote Transactions Parity Act. Introduced in the US House of Representatives by Utah Representative Jason Chaffetz, the bill is structured like MFA, with the exception that it exempts businesses that have sales of less than $10 million in state audits during the first year. In the years that follow, the exemption would gradually drop each year, eventually disappearing altogether by the fourth year.
Oregon Business Implications
If the Remote Transactions Parity Act gains momentum, Oregon businesses may need to prepare to collect sales tax from out-of-state customers who make purchases from the businesses' websites. The law would give a state that does collect sales tax the right to manage all transactions that occur within its borders. This means if a customer who lives in nearby Washington State or California purchases an item from an Oregon business’s website, Washington would have the right to expect sales tax to be collected and paid by the seller.
With the original bill having stalled so many times, Oregon businesses may not have reason to be concerned about the Remote Transactions Parity Act. But if the bill goes through, Oregon businesses may be tasked with a difficult choice: limit sales to Oregon customers or begin collecting taxes for each state that has a state sales tax in place.
For the time being, Oregon businesses aren’t required to pay state sales tax on online sales unless they have nexus in a customer’s state. As long as they confine their physical stores, warehouses, inventory, and employees to Oregon, a business is safe to sell to customers residing in any state or country across the globe.