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> Information provided on this site is for general guidance only and is often simplified. Actual IRS procedures are complex, and taxpayers should obtain professional assistance or use IRS sources for complete information.

 


Sales On The Internet
A company which is selling goods over the Internet and has a presence in the state of delivery, ie has established nexus in that state, will be required to register to collect sales tax on all taxable goods.

International Internet Sales
There is little certainty about the effect of current US legislation on the taxation of sales made from non-US web-sites.

The Internet Taxation Moratorium
Since 1999 there has been a moratorium on the imposition of Internet access taxes.


Sales On The Internet

A company which is selling goods over the Internet and has a presence in the state of delivery, ie has established nexus in that state, will be required to register to collect sales tax on all taxable goods.

However, in many, perhaps most cases, an Internet sale will not involve nexus in the receiving state, and the Supreme Court has prevented states from imposing sales tax on out-of-state supplies in that situation. Arguably, use tax provisions should then step in and impose tax on the sale, but the reality is that the operation of such consumption taxes depends heavily on the ability of the taxing authority to find traces or records of transactions, thus motivating taxpayers to comply with the law because of the near-certainty that they will be found out if they don't.

It seems obvious that once an individual consumer can buy and receive digital but taxable goods or services through the Internet, then it is going to be hard to collect tax if the seller is outside the tax jurisdiction. The taxing authority won't know and can't know about the transaction unless the consumer chooses to tell them, which history says is not likely!

The supply of goods ordered and paid for from a distant seller and requiring physical delivery within the taxing jurisdiction is a simpler case, because a cross-border transit is necessary. The supply is taxable only when there is nexus, and even then enforcement can be patchy; but Internet sales of this type are no different from existing mail-order catalogue sales.

In reality, for traders within the US who obey local tax laws, the Internet has been an almost tax-free zone because of the moratorium on Internet access taxes and the ban on taxation of inter-state supplies of products and services.

For many states, on-line cigarette sales are particularly hurtful for the tax-base. States like New York (tax of $3.00 a pack at the time of writing) and New Jersey ($2.40 a pack) find tax revenues dropping dramatically as smokers buy from on-line stores.

Cigarettes are a special case, because the 1949 The Jenkins Act requires vendors that ship cigarettes to another state to provide customers' names and addresses to taxing agencies in the receiving state. Most Internet cigarette vendors do not comply with the Jenkins Act, but some do, and their customers are receiving substantial tax claims from their home states - up to thousands of dollars in some cases. New Jersey, Pennsylvania, Ohio and New York City are among the municipalities that are billing residents.

The response of the states to this situation was to try to assert nexus in a wider range of situations; but they have not been very successful in this endeavour. They have also banded together to develop the Streamlined Sales Tax Program, (SSTP or SSUTA) which will regularize Internet sales taxation and may lead Congress to loosen the rules against inter-state sales taxation.

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Sales On The Internet
A company which is selling goods over the Internet and has a presence in the state of delivery, ie has established nexus in that state, will be required to register to collect sales tax on all taxable goods.

International Internet Sales
There is little certainty about the effect of current US legislation on the taxation of sales made from non-US web-sites.

The Internet Taxation Moratorium
Since 1999 there has been a moratorium on the imposition of Internet access taxes.



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  USA-International-Offshore- Expatriate-Tax.com
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