Re: Taxes

The issue of "internet taxes" has been and continues to be a very "hot"
topic.  There is currently in effect a congressionally mandated "moratorium"
on new internet taxes by the states.  That prevents new taxes in the near
term (but watch carefully for developments and changes).  That does not
prevent the application of existing laws.  In the case of sales taxes, most
states take the position that if your business is subject to the
jurisdiction of that state (i.e. the "standard" generally is that you do if
you either (i) have an office, (ii) a  place of business (retail outlet,
warehouse, factory, fixed address facility --[but query if you own a server
that is co-located in a state is that enough?], (iii) do you have tangible
assets in the state--such as leased equipment on site at 20 customer
locations that you maintain remotely, or (iv) do your employees regularly go
into the state in the course of business activities..e.g. salesmen, delivery
trucks, technical support staff, computer technicians who install, configure
and maintain a co-located server] ) then are doing business in that state
and are subject to the jurisdiction of that state. Be aware---THERE ARE 50
STATES - AND THE LAW OF EACH IS DIFFERENT so you should consult a qualified
local attorney, CPA or other tax advisor--- If that is the case, you have to
collect sales tax on sales to residents of that state, irregardless of if a
particular sale arises from an order that may be taken via the internet (or
any other electronic telecommunication) and shipped from a location outside
the state.  Take, for example, a sale by a e-commerce site a resident of
Virginia.   Assume your principal office is based in New York, but you take
an order and ship over the internet from a web site hosted on a co-located
server located at a co-location facility in California,   then send the
order fulfillment instructions to a Nevada based warehouse/fulfillment
center, then  your firm has a fleet of delivery vehicles that regularly
drive to and do delivery and installation in Virginia , then Virginia
requires you to collect sales tax on sales to Virginia residents and
businesses.  If you only ship via USPS or FedEX....then you don't [but
Virginia, as well as most other states require the buyer to report and pay a
use tax..even though that seldom occurs in reality].  As an attorney I work
with many emerging technology businesses, and the issue of when you become
subject to a state other than your "home state" is a controversial and
complex issues....with the law varying from state to state.  It is one that
you need to monitor as your business expands.

In the above example, if the sales were made to residents of California
would you need to collect sales tax?  I don't know..the issue of at what
point having "co-located" equipment on a rack in a state gives rise to
jurisdiction by that state is one of the unresolved issues of e-commerce at
this time.  If you use third party technicians to maintain, install and
configure the equipment, then the answer may be different from if you send
an employee into the state once a week to perform maintenance.

Practically, the best option is to work with a reputable accountant and heed
their advice in filing appropriate returns.  If you do that, you at least
have a good argument for good faith compliance and, as a practical matter,
most states will not pursue back taxes but will only insist on proper
payments on a going forward basis.

Bob Webb
ReedSmith
8251 Greensboro Drive, Suite 1100
McLean, VA 22102
bobwebb(at)webbcounsel.com
www.reedsmith.com
www.webbcounsel.com


----- Original Message -----
From: <paulkavanagh(at)tipinteractive.com>
To: <hwg-business(at)hwg.org>
Sent: Tuesday, December 05, 2000 3:01 PM
Subject: Taxes


> I'm sure this has been asked on this list many times, so please bear with
me
> if it is a simple question.
>
> What is a good way of dealing with the tax issue, without building a tax
> application? I.e., we sell goods on a site, but the buyer could be
anywhere,
> so we don't know the local tax requirements ahead of time.
>
> I believe that most 3rd party store fronts handle this for you. And most
> larger e-com apps build this in. But, let's say that you are a small
> business owner putting a couple of your best widgets out there for sale.
You
> have a simple email order form that collects CC info, possibly runs it
> through a payment processor. Do you need to be concerned about collecting
> state or provincial sales tax? Other taxes? What is the exposure if you
> don't? I would appreciate any thoughts or experience on the matter.
>
> Regards,
>
> Paul Kavanagh
>
> tip | Interactive
> http://www.tipinteractive.com/
>
>
>
>

HTML: hwg-business mailing list archives, maintained by Webmasters @ IWA