The Internet and Sales Tax Nexus

This post is in: Business

kennedy-smartbusiness-cvr-lg-11Our book, Smart Business Stupid Business is now shipping! And, in between all of the marketing that goes along with the publication of any new book, we’re also experiencing something new. How do we handle sales on our website, when states are creating so many conflicting nexus laws?

Colorado is the latest state to join the eTax club. Along with New York, North Carolina and Rhode Island, Colorado has now passed legislation trying to cash in on Internet sales. Companies who are caught in Colorado’s new law, may find that they have created a sales tax nexus in the state, even if they have no physical presence in the state.

Under Colorado’s new law, online retailers will be required to notify Colorado-based purchasers of their use tax obligation (use tax is equivalent to the sales tax you would pay if you bought an item locally instead of through the Internet). Companies will also be required to send a list of Colorado-based purchasers to the state’s Department of Revenue once a year.

Nexus – or the issue of what states you have to pay sales and income taxes in – is quickly becoming one of THE issues of 2010. We’ve got information on nexus in our forum, and devoted an entire chapter in Smart Business Stupid Business to the subject. There’s also a quick Nexus test in the book that you can use to help you sort out where your business’s tax obligations lie. As the rules are changing so fast, this is one area you will need to keep on top of, particularly if you do any Internet sales.

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