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Don’t ignore tax-collection duties for online sales

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in Small Business Tax

Does your small company sell products or services over the Internet? If so, make sure you enter the vast world of cybersales with your eyes wide open. Specifically, be aware that you could be responsible for collecting sales tax from online sales.

The issue has been hotly debated among individual states and retailers for years. But a newly formed initiative represents an important step toward a uniform national policy.

The initiative, called the Streamlined Sales Tax Project (SSTP), got off the ground on Oct. 1, 2005. So far, 19 states have joined the project and more are expected to follow.

Here’s how it works: The SSTP is a computerized program that tracks the sales tax rates for each of the participating states. It automatically adds the appropriate sales tax to all online purchases by residents in those states.

As part of the overall project, states are encouraged to offer retailers amnesty on taxes that should have been collected (but weren’t from online sales.

Also, several states have revised their laws to avoid contradictions and provide greater uniformity of categories for sales tax purposes.

Retailers have long avoided this responsibility by relying on a landmark 1992 Supreme Court case. In that instance, the highest court in the land said it would be overly onerous to expect merchants to calculate all the possible tax permutations of the various states. Now, the SSTP is designed to simplify the processes for online sales tax collections.

Note that the SSTP imposes tax at the customer’s destination instead of the purchaser’s location. So, a small business will be forced to deal with sales taxes of a myriad of different states.

Online resource: For information on the SSTP, visit

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