You might have heard of the so-called Internet tax or ‘Amazon’ tax and figured it had nothing to do with you. Actually, if you are an affiliate marketer or have a website that pays affiliates or even any kind of business that pays for referrals, you need to get up to speed quickly about the Amazon tax.
First of all, some clarification. If you hear someone talking about the “internet” tax, they could be talking about the Amazon tax, the iTunes tax (which we will talk about on Thursday) or they could be talking about a tax on Internet connection. Obviously, those are pretty different taxes, so make sure you understand exactly what’s being talked about before you figure out whether it applies to you or not.
The Amazon tax is really a way of describing nexus creation. Nexus means connection. If you have connection in a state you likely have also just created a sales tax nexus or (worse yet) an income tax nexus.
That means if you have a business located in Georgia, live in Georgia, ship from Georgia and then all of a sudden get a nexus creation to New York – you’re now responsible for learning New York’s sales tax rules, registering to collect sales tax and then start collecting sales tax for any products shipped to New York.
In the past, nexus was pretty straightforward. If you had a physical presence in a state, then you had nexus. The only part that got a little confusing was catalog sales. You’ve probably seen those order forms that tell you if you live in one of these 3 or 4 states you need to add sales tax to your purchase price. That was because that company had nexus in those 3 or 4 states.
But in today’s new economy with broke states and Information Age businesses, the nexus lines have gotten fuzzy. That’s where the Amazon tax comes in.
The states that have enacted the Amazon tax – New York, North Carolina, Rhode Island, Colorado and maybe Washington (new law, not yet completed deciphered) – if you have an affiliate in one of those states, you have nexus. So Amazon and other big web-based companies responded by simply firing all of their affiliates in those states. They didn’t want the paper work hassle.
And, the other shoe hasn’t dropped yet. The hundreds of thousands of businesses who have websites might be looking at exactly the same issue. Unfortunately, they might not have all the tax and legal counsel at their finger tips that Amazon, Overstock and others have, though. If you’re one of those businesses, and you haven’t gone through your affiliate or referrer list, you might find that you get a very nasty letter one of these days.
That letter will tell you that you just got hit with the Amazon tax and give you a bill for the sales tax you should have collected, but didn’t, and now owe within 30 days.
Learn more about what you can do about Amazon Tax plus other hot tax issues facing eBiz today on the next FREE Teleseminar “Tax Strategies for eBiz Owners” Wednesday, May 5, 2010 at 1 pm Pacific, 4 pm Eastern.
Register at www.DianesSeminars.com
Learn what this tax really is and what it means to ever single business owner with a website. It’s not just a tax on Amazon. It’s a tax on you too, and it’s already been passed in four states, maybe five depending on a closer examination of Washington’s new state revision.
Sign up now at www.DianesSeminars.com
Blogs Still to Come:
Wednesday, April 28, 2010 Look Out For Colorado & North Carolina
Do you sell to customers or buy from businesses in Colorado and North Carolina? You might not want to after you find out what these states are up to!
Thursday, April 29, 2010 The Secret eBiz Killer: The Digital Download Tax (iTunes Tax)
You might have heard of the iTunes tax and thought it had nothing to do with you. Think again! If you have nexus in one of these key states and you sell ANYTHING via digital download, you must collect and reimburse state sales tax.
Fri, April 30, 2010 – Selling with PayPal? New Reporting Requirements
A new reporting standard passed a few years ago will jump into the forefront by January 2011. That’s when PayPal (and yes, that means eBay) will be forced to turn over their records of who bought and sold on eBay. If you’ve regularly sold on eBay and haven’t reported the sales on your tax return, expect a letter from the IRS.
You don’t want to miss this information!