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Online Sales Tax Rules

The rules for when to charge and when not to charge sales tax continue to change.  For years, websites were responsible solely for paying STATE sales tax for any sales shipped to a state in which they had a physical presence.   Now, it is inevitable that all online orders will eventually require state tax to be paid.  For the time being, here is a summary of the laws and rules surrounding online sales tax collection.

“Some states have enacted legislation that requires large online sellers to collect sales tax even with no physical presence in the state.” (NOLO)

For example, the Marketplace fairness act of 2013 was considered by the House.  This proposed federal law would allow states to require that online sellers not physically located in their state to collect sales tax.  The good news:  Online sellers that gross less than $1 million would be exempt.  It is not long before this law is passed.  The primary barrier looks to be a slight simplification of tax code for each state that wants to take advantage of this law–when it comes to pass.

Destination Based Sales Tax Rules

Several states have complex rules that require the seller to use county/district specific tax rates.  This is known as “Destination based” sales tax collection.  The following states use Destination-based sales tax collection:

  • WA
  • ID
  • NV
  • WY
  • CO
  • ND
  • SD
  • NE
  • KS
  • OK
  • MN
  • IA
  • AR
  • LA
  • WI
  • MI
  • IN
  • KY
  • WV
  • AL
  • GA
  • FL
  • SC
  • NC
  • MD
  • NJ
  • NY
  • CT
  • RI
  • MA
  • VT
  • ME

I know…a long list.  For a map-based version of this, check out CLICK HERE Montana Banana has developed software that plugs into your Magento Shopping Cart and eCommerce System that will automatically calculate destination-based tax rates. Click on the box below to let us help you with your tax calculations.

Help Me with my Tax Calculations

Stewart McCullough

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