Collect/Pay sales tax?

11 replies
  • ECOMMERCE
  • |
I am in NY and I have a online drop ship business. I do not have a office. The manufacture which is in Georgia handles all shipping and returns.

Do I have to collect or pay sales tax in any state?

I have not been charging sales tax for any state and I have not paid sales any sales tax. Been in business about a year.
#collect or pay #sales #tax
  • Profile picture of the author Hermes Urbanus
    Originally Posted by wonderd View Post

    I am in NY and I have a online drop ship business. I do not have a office. The manufacture which is in Georgia handles all shipping and returns.

    Do I have to collect or pay sales tax in any state?

    I have not been charging sales tax for any state and I have not paid sales any sales tax. Been in business about a year.
    First off, this really isn't the best place for an answer that you can act upon. You need to pop the $50 or whatever and go talk to a CPA or a tax attorney - they will have advice that you can legally act upon. It's just a safer way of doing business.

    With that said, just to give you an idea of how things work down here in Cleveland... If I were doing the same thing here in Ohio I would (currently) only be liable to Ohio for any sales made within my state (which means I'd be charging Ohio customers sales tax or eating it at the end of the year.)

    Also noticed that you don't have an office (nice perk of a home business, eh?) I'm no tax expert or whatever, but I would also suggest you research why a person should almost never claim office space at home on their federal taxes. (Even if you had no plans to claim that, just knowing the facts of the matter is totally worth the ten minutes of searching and reading.)

    Maybe someone from New York will be able to share with you their experiences on here but, regardless, go seek professional advice (even if it's just this one time) so that you will know how to proceed in the years to come as your business continues to grow.

    Best of luck!
    Signature
    {{ DiscussionBoard.errors[8858533].message }}
  • Profile picture of the author alksense
    Originally Posted by wonderd View Post

    I am in NY and I have a online drop ship business. I do not have a office. The manufacture which is in Georgia handles all shipping and returns.

    Do I have to collect or pay sales tax in any state?

    I have not been charging sales tax for any state and I have not paid sales any sales tax. Been in business about a year.
    My S Corp is registered in NY for my drop shipping business and I have a NYS sales tax certificate. I have to report and pay sales tax on all of my orders that ship to the state of NY (no matter where they come from).

    I just send my accountant my statements every month and he does everything for me. I would recommend doing the same. Most of them will meet with you for no charge. Just tell them your situation and ask them what you should bring.

    Hope that helps,
    Anton
    {{ DiscussionBoard.errors[8858662].message }}
  • Profile picture of the author ServicesForIM
    I completely agree with the answers you have been given so far. I forget to do this myself many years ago, and I received a hefty bill from the IRS. It is not fun at all.
    {{ DiscussionBoard.errors[8859639].message }}
  • Profile picture of the author wonderd
    I wanted to point this out and get some opinions on it.

    "When to Collect Sales Tax Online
    If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.
    In legal terms, this physical presence is known as a "nexus." Each state defines nexus differently, but all agree that if you have a store or office of some sort, a nexus exists. If you are uncertain whether or not your business qualifies as a physical presence, contact your state's revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state."

    This can be seen at Collecting Sales Tax Over the Internet | SBA.gov

    This is what confuses me because I know my bedroom is not considered a nexus...

    What are your takes on this?
    {{ DiscussionBoard.errors[8859798].message }}
    • Profile picture of the author Hermes Urbanus
      That seems to imply that if I sell you something from here in Cleveland, I am not required to collect sales tax from you. If I sell something to someone in Toledo, I have to collect sales tax.

      Though, if I'm not mistaken, that information might be a little dated...

      Originally Posted by Supreme Court leaves online sales tax question to Congress


      The U.S. Supreme Court will leave it to Congress to settle the contentious question of online sales tax collection that brick-and-mortar retailers contend puts them at a disadvantage to giants such as Amazon.com.

      The nation's highest court declined on Monday to hear a petition from Amazon.com and Overstock.com asking for a review of a New York Court of Appeals ruling that upheld the collection of sales tax for online purchases.

      In 1992, the Supreme Court ruled sales tax only needs to be collected if a business has a physical presence in a state.

      But the New York law, enacted in 2008, considers retailers to have a physical presence even if the businesses accepts "affiliate" sales leads from other websites.

      Full Story Here: http://www.pcworld.com/article/20685...-congress.html
      You may want to read up some more on this topic AND THEN GO TALK TO A PROFESSIONAL.
      Signature
      {{ DiscussionBoard.errors[8859834].message }}
    • Profile picture of the author OnlineStoreHelp
      Originally Posted by wonderd View Post

      I wanted to point this out and get some opinions on it.

      "When to Collect Sales Tax Online
      If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.
      In legal terms, this physical presence is known as a "nexus." Each state defines nexus differently, but all agree that if you have a store or office of some sort, a nexus exists. If you are uncertain whether or not your business qualifies as a physical presence, contact your state's revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state."

      This can be seen at Collecting Sales Tax Over the Internet | SBA.gov

      This is what confuses me because I know my bedroom is not considered a nexus...

      What are your takes on this?
      The definition of Nexus keeps changing and evolving over the time. But if you live in the state, even if you run it out of a home office, you have Nexus in that state. So yes, even home offices will have Nexus in your particular state. Now if you are in a no Sales Tax State like Oregon you are in luck.

      But you have to keep watching how states are defining physical presence. For example, it all started about 7 years ago when Dell lost a case in either Arkansas or Alabama. Dell outsourced their warranty support to a third party. The state argued that even though it was outsourced, the third party support acted as an extension of the business, meaning they had nexus in the state even though no physical location. The court agreed.

      Same thing with Amazon. States are now saying, if you employ "affiliates" in the state, that extends Nexus to the company using them. For a long time Amazon pushed the envelope in states like California saying their cloud development group in San Jose was a completely different company so they didn't have nexus which is IMO pushing it.

      The biggest worry I have is for drop shippers or those that use Fulfillment services (Amazon FBA) and them saying, well you hold inventory in this state so you have Nexus.
      {{ DiscussionBoard.errors[8861569].message }}
  • Profile picture of the author bigcat1967
    I would pay for a tax attorney. Don't take any chances.
    Signature

    <a href="https://changeyourbudget.com/save-money-on-your-water-bill/">How to Lower Your Water Bill</a>

    {{ DiscussionBoard.errors[8861609].message }}
  • Profile picture of the author timpears
    You say you don't have a location in NT State, but what do you think your home is? The place where you are working from. That is enough to require you to pay sales taxes. The choice whether you collect them from your customers is irrelevant to the State of NY and your need to pay them.

    Bottom line, you owe for all sales to NY State for the past, you also owe for all sales to the State where your supplier is as that is a presence you have, due to your inventory is located there (ala, your warehouse).
    Signature

    Tim Pears

    {{ DiscussionBoard.errors[8861612].message }}
  • Profile picture of the author Daniel J
    As others have said, it is in your best interest to hire a CPA or other knowledgeable accountant. I also learned this the hard way. I'm actually waiting for a call back from my CPA about this matter as I write this. Since I use Amazon FBA, the products are shipped out of 6 or 7 different locations- none of which I am based in. I defer to the professionals to tell me what my responsibility is in this case as I prefer to do it right and keep the IRS and the state off my back. If I think of it, I'll update when I hear back from my CPA. However, it will be best not to follow advice in this thread (including mine) without consulting a professional. Hope this helps
    {{ DiscussionBoard.errors[8863444].message }}

Trending Topics