The Internet Tax Man Cometh
Author: Tim Knox
Q: I was contacted by the city tax collector to say that my
business is scheduled to be audited to see if I owe sales tax
on items purchased on the Internet. Can they really make me pay
sales tax on internet purchase? I thought you could buy things
online tax free? -- Charlie B.
A: Sorry, but your local municipality is well within its rights
to audit your business to identify items purchased online. The
city can also demand payment of sales tax on those items if
sales tax was not previously paid. Don't be surprised if the
auditor asks for access to your books and to see purchase
receipts and invoices for at least the past year.
One of my companies recently underwent such an audit and it
really was not as painful as you might think. Being a software
company, the majority of our online purchases were for computer
equipment, technical manuals, and software development tools.
Since we purchase computers from a large supplier who collects
sales tax at the point of sale (ditto for the development
tools), the only sales tax we ended up owing was for an
inordinate number of technical manuals and books purchased at
http://Amazon.com .
If your small business is like most, the majority of your large
purchases are made locally from companies that already collect
sales tax. Furniture and computer equipment are typically the
largest ticket items a small business buys, so unless you
bought your desks and computers off of Ebay (which is highly
possible these days) you should be OK.
Internet sales taxation has been a topic of contention even
before Amazon sold its first book and Priceline booked its
first flight. One of the more controversial points is that no
one, including our own government, seems to have a clue how to
implement a fair and logical Internet taxation process. With
over 7,500 different local, county and state taxation systems
in the United States, you can understand the controversy.
In 1998, Congress did what it usually does when faced with a
potentially explosive issue like Internet tax collection -- it
decided to put off making a decision. Congress enacted a
three-year moratorium on the collection of taxes to give an
appointed advisory board time to come up with an acceptable
solution. That moratorium ended in 2002 and opened the door for
municipalities to begin collecting sales tax on their own.
Here in Alabama the state sales tax collection department has
aired radio spots asking Alabamians to step up to - and toss
dollars into - the proverbial collection plate. The commercial
kindly suggests that if I have purchased anything from an
online retailer, I am honor-bound to proclaim such purchases
and submit the appropriate sales tax to the collection
department right away. They thank me in advance for my
cooperation.
So, Charlie, when the auditor shows up at your door the best
thing you can do is smile politely and be totally forthcoming.
The sales tax that you pay is a small price for the convenience
of shopping online.
Or at least that's what you should tell yourself as you write
the auditor a check
About The Author: Tim Knox Entrepreneur, Author, Speaker
http://www.prosperityandprofit.com
http://www.dropshipwholesale.net http://www.smallbusinessqa.com
http://www.timknox.com
business is scheduled to be audited to see if I owe sales tax
on items purchased on the Internet. Can they really make me pay
sales tax on internet purchase? I thought you could buy things
online tax free? -- Charlie B.
A: Sorry, but your local municipality is well within its rights
to audit your business to identify items purchased online. The
city can also demand payment of sales tax on those items if
sales tax was not previously paid. Don't be surprised if the
auditor asks for access to your books and to see purchase
receipts and invoices for at least the past year.
One of my companies recently underwent such an audit and it
really was not as painful as you might think. Being a software
company, the majority of our online purchases were for computer
equipment, technical manuals, and software development tools.
Since we purchase computers from a large supplier who collects
sales tax at the point of sale (ditto for the development
tools), the only sales tax we ended up owing was for an
inordinate number of technical manuals and books purchased at
http://Amazon.com .
If your small business is like most, the majority of your large
purchases are made locally from companies that already collect
sales tax. Furniture and computer equipment are typically the
largest ticket items a small business buys, so unless you
bought your desks and computers off of Ebay (which is highly
possible these days) you should be OK.
Internet sales taxation has been a topic of contention even
before Amazon sold its first book and Priceline booked its
first flight. One of the more controversial points is that no
one, including our own government, seems to have a clue how to
implement a fair and logical Internet taxation process. With
over 7,500 different local, county and state taxation systems
in the United States, you can understand the controversy.
In 1998, Congress did what it usually does when faced with a
potentially explosive issue like Internet tax collection -- it
decided to put off making a decision. Congress enacted a
three-year moratorium on the collection of taxes to give an
appointed advisory board time to come up with an acceptable
solution. That moratorium ended in 2002 and opened the door for
municipalities to begin collecting sales tax on their own.
Here in Alabama the state sales tax collection department has
aired radio spots asking Alabamians to step up to - and toss
dollars into - the proverbial collection plate. The commercial
kindly suggests that if I have purchased anything from an
online retailer, I am honor-bound to proclaim such purchases
and submit the appropriate sales tax to the collection
department right away. They thank me in advance for my
cooperation.
So, Charlie, when the auditor shows up at your door the best
thing you can do is smile politely and be totally forthcoming.
The sales tax that you pay is a small price for the convenience
of shopping online.
Or at least that's what you should tell yourself as you write
the auditor a check
About The Author: Tim Knox Entrepreneur, Author, Speaker
http://www.prosperityandprofit.com
http://www.dropshipwholesale.net http://www.smallbusinessqa.com
http://www.timknox.com
