Sales Tax for the Online Retailers

I want to give thanks to Sheryl Nance-Nash, a reporter with AccountingWeb.com, that we spoke with in regard to the proposed federal legislation to require online retailers to start collecting sales tax on online sales. Currently only brick and mortar stores are collecting sales tax from their customers where online retailers have been able to get away with not collecting the tax giving a distinct advantage to online retailers. This is a big win for the states to start collecting more tax from online retailers and for brick and mortar stores as they no longer at a disadvantage. States, like our home state of Texas, States have become very aggressive in the collection of sales tax. The Texas Comptroller reached a well-publicized deal with Amazon last year after the state contended that Amazon owed it $259 million in uncollected sales taxes for the prior 4 years. This has led to the federal legislation to be introduced. As we point out in the Nance-Nash’s article this will pose quite a compliance headache for smaller retailers that will have to abide by the same rules of the big boys (being the Amazons of the world) who will have to comply with sales tax in each jurisdiction they sell:

Who is likely to be most impacted by the change in the law? "This is going to create quite a compliance headache for smaller online retailers. The rules regarding states and sales tax differ greatly from one state to the other. Therefore, the online retailer will have to become well versed in each state's tax rules, which can be overwhelming to a small retailer. Retailers will be required to file sales tax returns in each state (depending on the volume of sales, as frequently as every month in some cases) and remit that tax, creating a compliance headache," says Vince Porter, CPA, at Porter & Company, CPAs.

Furthermore online retailers should get solid accounting software to track the sales tax in each jurisdiction they sell in:

Get solid accounting software. You want to be sure you have the best software to record all of your customers' sales accurately. "It's imperative that online retailers have a reliable piece of accounting software to record sales and sales taxes and jurisdictions of customers. QuickBooks is a great piece of software (at an affordable price) that can track all of this information, including the rates of each state and the collection agent of the state," says Porter.

After posting the article to Twitter a company by the name of TaxCloud came to our attention (https://taxcloud.net  @TaxCloud) . This appears to be a very useful software for retailers to plug into their shopping carts as it will automatically update shopping carts to charge sales tax based on the jurisdiction of the customer. The online retailers will still need to take care of the compliance piece (filing and paying of the sales tax returns ) but it appears that TaxCloud can make sure the correct tax is charged to the customer on the transaction end of the equation.  

http://www.accountingweb.com/article/how-prepare-clients-marketplace-fairness-act/221198