E-commerce Sales Tax

[xerx214]

Hello, can you please clarify one issue for me? I’m starting an e-commerce website selling art to US and Canadian customers. I am based in New York, so I understand I have to charge everyone purchasing from New York sales tax. My understanding is also that people purchasing from all the other states should not be paying sales tax. Now, here’s the tricky part. One of my competitors is a small company as far as personnel, but with big sales numbers, he has been in the business for about 8 years now. He is based in the state of Washington. He is paying a distributing and warehousing company to store all his merchandise in California and they also ship it out of there. He DOES NOT charge any customers from California sales tax even though he appears to have physical presence in that state (in my opinion). There has to be something else here I’m missing, there’s no way he would risk such a problem with the IRS, how is he going around this rule? The reason I’m asking is that I want to ship out of California as well. Given that California is the state with the biggest population, charging everyone there sales tax does not sound as a smart business move. Also, for New York customers, do I have to charge the sales tax for New York state, or for the particular county I live in (Nassau, NY)?

[Ray_Belanger_MB]

Hi xerx,

This is a tricky issue.  If you warehouse your goods in California, and ship from that warehouse (however small it is) you could be seen to have a temporary presence (a nexus) in California and subject to tax collecting obligations.  How the State of California determines your presence is something you will have to pay a California tax specialist to find out in advance. Maybe your competitor has already done that.

If you are shipping from New York State, you will have to collect NY State sales tax from buyers  in NY State. I don't know Nassau County regulations.

Here are a couple of links that might help. And remember, with free advice, you always get what you pay for ;-)

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https://www.salestaxinstitute.com/Sales_Tax_FAQs/What_is_nexus

http://taxation.lawyers.com/sales-and-use-tax/a-physical-presence-can-be-a-factor-in-online-sales-ta...

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[Bud_Recor]

In NY you charge sales tax based on the delivery point.  Such as if at a retail location, it's where the store is located. Via a web store it will be based on the customer's location as that is the point of delivery.

[bartal20]

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[Cale_Switzer]

@ bud, so you're saying with my NY based e-commerce store I should be collecting taxes from everyone outside of NY based on their state's tax system? And when i file my quarterly statement the NYS gov't gets all of that?

[Ray_Belanger_MB]

Hi to Bud and others...

Just to be clear, sales tax is collected (not charged) on a sale.  

A sale takes place when the customer takes possession of the goods.

In most cases the customer possession takes place when the goods leave the store's premises. At that point they belong to the customer and the sales tax becomes due.

If the store and the customer are in the same state - then state sales tax is due. If the they are in a different state, no tax is due.  (Unless you are in California, which is a whole other ball of wax) 

[Bud_Recor]

No not outside of NYS, unless of course you have some sort of nexus in another state. If you have a e-commerce site within NYS, then tax, if applicable, is only charged based on the customers address within NYS.