online ordering and taxes?

[jimcav]

did nashbar just start charging sales tax? i know in some places i've lived if a chain has a store in that state, they charge tax, but is there a new blanket policy where online ordering is charging taxes? seems like in the past i was not charged tax, but it has been over year since i ordered anything from them.
my sales tax here is 9%, so i often get stuff online instead, but it is going to be a wash if there is shipping and tax.
thanks
jim

[oldfatslow]

Nashbar is owned by Performance Bike and depending on how they are structured they may be required to collect sales taxes in states where they Performance has retail operations.

[regularguy412]

The tax is applied based on where YOU live, not whether there's a brick & mortar location of a particular store in your state.

I managed an online store for over 10 years, beginning in about 1994. Early on, states were not too worried about tax revenue lost to out of state retailers, so they just ignored it. However as internet sales boomed, many states started feeling the crunch. Laws have been passed to support the states in their effort to recover these lost taxes. It's really about how actively each state pursues the reclamation of these taxes.

As each state more aggressively sues retailers in another state for a lack of tax collection, it makes a difference. Near the end of my tenure as an online retail manager, the trend was for 'most' online sellers to just include the tax table for every state as part of their online purchase software package, and subsequently remit those tax collections. Retailers found that going through a state audit was a lot of work, and really no fun.

Mike in AR

[Bud]

The tax is applied based on where YOU live, not whether there's a brick & mortar location of a particular store in your state.
Mike in AR

Interesting. Then how does a place like Universal Cycles get away without charging sales tax for anyone, regardless of the state in which they live? I always assumed it had to do with having a retail outlet.

[regularguy412]

Interesting. Then how does a place like Universal Cycles get away without charging sales tax for anyone, regardless of the state in which they live? I always assumed it had to do with having a retail outlet.

They've either never been heavily pursued by any state. OR: they just 'eat' the tax,i.e., they just pay it out of the retail receipts.

That second option is kinda dangerous in that, if the retailer is not tracking the taxes they 'should' be collecting (state by state), they may not know how much to pay any individual state. That's where the State Tax Audit comes in. It's really an ugly scene -- having to go back as much as seven years and _THEN_ having to pay out a whopping tax bill plus penalties after the audit is over.

Mike in AR

[BURCH]

When you are filing your taxes, you will see a section that asks for taxes to be paid from online purchases or something to that effect. I took it that consumers are supposed to be keeping track of this and reporting themselves? I imagine that if you ever got audited, you would have to know this info. That last statement is an assumption.

[regularguy412]

When you are filing your taxes, you will see a section that asks for taxes to be paid from online purchases or something to that effect. I took it that consumers are supposed to be keeping track of this and reporting themselves? I imagine that if you ever got audited, you would have to know this info. That last statement is an assumption.

Well, the short answer is 'Yes'. However, state governments know where the money is,, and it's NOT in pursuing hundreds or thousands of individuals in any one state to recoup their losses. The states put the burden on the retailer. And rightly so. That's the bottleneck through which all the revenue flows, so it's the easiest source to regulate -- and sue -- if need be.

Mike in AR

[taz-t]

Well, the short answer is 'Yes'. However, state governments know where the money is,, and it's NOT in pursuing hundreds or thousands of individuals in any one state to recoup their losses. The states put the burden on the retailer. And rightly so. That's the bottleneck through which all the revenue flows, so it's the easiest source to regulate -- and sue -- if need be.

Mike in AR

Okay, but how do the customers' state(s) have jurisdiction over the retailer to impose a tax or collect the tax? Unless the retailer has a physical presence in the state or the customer's state has a reciprocal agreement with the state of residence/incorporation of the retailer to collect the tax, I don't see how the customer's state can collect from the retailer. Is there a federal law governing this? Wouldn't the burden be on the retailer's state to collect taxes and then distribute them to the customer's state?

I understand how the retailer that has a physical presence in the customer's state can be compelled to pay even if the online retail activities take place elsewhere.

- taz

[Orin]

The tax is applied based on where YOU live, not whether there's a brick & mortar location of a particular store in your state.

I managed an online store for over 10 years, beginning in about 1994. Early on, states were not too worried about tax revenue lost to out of state retailers, so they just ignored it. However as internet sales boomed, many states started feeling the crunch. Laws have been passed to support the states in their effort to recover these lost taxes. It's really about how actively each state pursues the reclamation of these taxes.

As each state more aggressively sues retailers in another state for a lack of tax collection, it makes a difference. Near the end of my tenure as an online retail manager, the trend was for 'most' online sellers to just include the tax table for every state as part of their online purchase software package, and subsequently remit those tax collections. Retailers found that going through a state audit was a lot of work, and really no fun.

Mike in AR

The above is inaccurate.

There WAS a requirement for a business to have a physical presense in a state before the state could force the business to collect taxes. This is a federal issue as it involves interstate commerce and it was a Supreme Court decision that set up the physical presense rule as I recall and would need a federal law or Supreme Court decision to change. In fact, see:

http://www.howtoadvice.com/SalesTax

Certainly in WA, it was the responsibility of the BUYER to remit a USE TAX to the state for out of state purchases. No-one ever did of course and the state only bothered chasing buyers of big ticket items like cars, boats RVs and so on.

As for Nashbar, they started charging sales tax for WA residents when they were bought by Performance, which has stores in WA.

Orin.

[regularguy412]

Okay, but how do the customers' state(s) have jurisdiction over the retailer to impose a tax or collect the tax? Unless the retailer has a physical presence in the state or the customer's state has a reciprocal agreement with the state of residence/incorporation of the retailer to collect the tax, I don't see how the customer's state can collect from the retailer. Is there a federal law governing this? Wouldn't the burden be on the retailer's state to collect taxes and then distribute them to the customer's state?

I understand how the retailer that has a physical presence in the customer's state can be compelled to pay even if the online retail activities take place elsewhere.

- taz

I believe this is the case.

Truthfully, I believe it is only what one would categorize as 'large retailers' that would need to worry about audits or litigation. The stores I managed were part of a chain of over 400 stores (in 1994). By the time I left the company in 2005, we had over 700 stores.

Early on, we had a couple of states ( Alabama is the only one I can now remember ) that pursued a lost tax revenue claim against our company. I think most large retailers prefer to avoid state audit problems, so they just institute tax collections across the board for all their sales.

Conversely, if we made a sale by telephone, we typcially did NOT charge tax based on the shipping address of the caller. It was quite time-consuming to look up all that info. So we sort of split the difference and charged tax based on the consumer's residence location for web orders,, and only charged 'our' local tax on phone orders. We bascially treated a phone order as a 'walk-in'.

In my estimation, most states will leave you alone if they find you are collecting and remitting at least 'some' reasonable amount tax to them.


Mike in AR

[regularguy412]

The above is inaccurate.

There WAS a requirement for a business to have a physical presense in a state before the state could force the business to collect taxes. This is a federal issue as it involves interstate commerce and it was a Supreme Court decision that set up the physical presense rule as I recall and would need a federal law or Supreme Court decision to change. In fact, see:

http://www.howtoadvice.com/SalesTax

Certainly in WA, it was the responsibility of the BUYER to remit a USE TAX to the state for out of state purchases. No-one ever did of course and the state only bothered chasing buyers of big ticket items like cars, boats RVs and so on.

As for Nashbar, they started charging sales tax for WA residents when they were bought by Performance, which has stores in WA.

Orin.

I won't dispute this. However, the reference you list is dated 1991. I believe there have been some amendments to interstate commerce laws regarding web sales since then.

Alll, my experience with web-based sales included a tax table for all states -- after about the year 2000 ( at least for our company). AND ,, we did not have a physical presence in all states. All our stores got the same software ( as far as I knew).

We had several problems implementing the various tables. Lots of fits and starts trying to get the software to accurately calculate. This became painfully evident when we found customers making online purchases from within our very own CITY. The tax rate was not correct and I complained mightily to IT about this problem. I was not ever convinced that the site software calculated the tax correctly for ANY purchase.

Mike in AR

[jimcav]

but bottomline i owe the big WA sales tax because performance is here.
thank goodness for coupon sales, if not for the meager selection at my local shop, i'd just go there--i do for routine stuff, but i was looking for a dinotte light, which they don't have... and nashbar did.
thanks
jim

[Orin]

I won't dispute this. However, the reference you list is dated 1991. I believe there have been some amendments to interstate commerce laws regarding web sales since then.

Alll, my experience with web-based sales included a tax table for all states -- after about the year 2000 ( at least for our company). AND ,, we did not have a physical presence in all states. All our stores got the same software ( as far as I knew).

We had several problems implementing the various tables. Lots of fits and starts trying to get the software to accurately calculate. This became painfully evident when we found customers making online purchases from within our very own CITY. The tax rate was not correct and I complained mightily to IT about this problem. I was not ever convinced that the site software calculated the tax correctly for ANY purchase.

Mike in AR

The link was a bit old, but it wasn't contrary to what I could remember - there is a lot going on at the moment in this area...

This is from the Seattle Post-Intelligencer as of June this year:

"OLYMPIA -- Washington will join 21 other states in an effort to encourage Internet and catalog companies to not only collect state sales taxes on purchases, but also send them on to the states where the products are delivered. On Saturday, the Streamlined Sales Tax Governing Board granted Washington's petition to become a member of the Streamlined Sales Tax Project.

More than 1,000 companies that sell products in multiple states have voluntarily agreed to begin collecting and distributing sales taxes to any state that agrees to become a member of the project."

Orin.

[taz-t]

but bottomline i owe the big WA sales tax because performance is here.
thank goodness for coupon sales, if not for the meager selection at my local shop, i'd just go there--i do for routine stuff, but i was looking for a dinotte light, which they don't have... and nashbar did.
thanks
jim

edited for content:

Correction - I did actually get charged for GA state sales tax on my nashbar order. Sorry for the mis-info.

- taz