My wife dragged me to Beverly Hills estate sales. At first I was very disinterested because I hate to shop. You can tell that by my clothes. I still wear khakis and corduroys from five years ago. I guess that is a dead give away that I am a CPA.
Well, I still went to the sales, so to pass the time I learned about the antique and vintage items, and what they were selling for on the Internet. The prices of these items at some estate sales were from $1.00 to $15.00. Their E-bay values ranged from $30.00 to $99.00.
So, not being one to accumulated old things, my wife and I created Manhattan Beach, California Antiques. Now, before you start googling our name, let me tell you, its not there. I haven’t even opened a web site, but do sell many pieces we picked up. This puts me at ground zero of sales tax wars.
Internet businesses have a distinct advantage over brick and mortar businesses by not being required to collect sales tax unless they have a presence in the same state as the buyer.
Well, the fight has moved from the state to the national level. The Main Street Fairness Act, sponsored by Dick Durbin last August, helps the states in their enforcement. The Act would allow states to require Internet and mail-order retailers to collect state and local sales taxes. To exercise this authority, a state must sign on to the Streamlined Sales and Use Tax Agreement (SSUTA) and adopt legislation implementing its provisions.
So far, almost half the states have implemented SSUTA. Small businesses (less than $5 million) are exempt from this enforcement. The act places a policy of basic fairness among the states so that large retailers can’t run from state to state to avoid sales taxes.
But what does this mean for the small business person? For those under $5 million, nothing. You still report all sales and collect applicable taxes. For larger Internet companies, you must really get your sales tax infrastructure in place. So many companies of all sizes do not report sales in the correct state, if they report it at all.
As a CPA, I advise any client to impliment whatever software they need to track sales tax correctly. Don’t wait for your state to exercise its this agreement, or law if it passes. And if you are an Internet business, do the right thing before the government does it for you.
Sales taxes must be taken as serious as income taxes. Discusss this and any tax decisions with your tax advisor before acting.
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