New Sales Tax Laws(Amazon Sales Tax Law)


Go To Great Panes, Kathryn Maloney ©2011
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I’ve seen lots of folks posting about the new California sales tax law and the same type of law in a few other states (like IL, AR CT, NC…), and there seems to be a lot of confusion–not unlike the confusion back in 2008 when NY instituted a similar law (read more about that here).

Hopefully this post will help keep you from getting caught up in the hype & put you at ease a bit.

In short:

Now that so much of our commerce is internet-based and many businesses have representatives in other states that work for them online, the states are reworking the laws so the burden of collecting & remitting sales tax on taxable transactions isn’t on the buyer, but is on the seller.

Most of these laws have both a transaction-allowance that excludes most small businesses from this responsibility and a requirement of a new type of physical presence in a state.

(For example, you’d need to both ship $10,000 in goods to NY addresses in a year and you’d need to be affiliated with a NY-presence that you pay commissions or fees to, like Etsy, before you’d need to worry about this.)


Here’s the main points folks seem to be unclear on:

  • This isn’t about a new tax. It’s tax that is already owed to the state on taxable purchases.
  • This is only about regulating who is responsible for collecting/remitting the existing taxes due to the state on “remote sales” (mail order sales, internet sales, phone sales).
  • This doesn’t mean you need to collect your state’s sales tax from buyers who are having items shipped to an out of state address.
  • This doesn’t mean you need to collect a different state’s sales tax from buyers who are having items shipped to an out of state address unless you ship a whole lot there and you pay commissions/fees to someone/a business in that state.
  • These new Amazon*sales tax laws are about re-defining/clarifying what a “business nexus” in a state is, because the current definition leaves a loophole that allows big businesses like Amazon to avoid collecting sales tax on taxable transactions even though they have representatives within that state who are referring folks to their website and receiving a commission for doing so.

    When the seller doesn’t collect sales tax on taxable transactions & the buyer does not remit use tax on those purchases, then the states aren’t getting the money they are due & money they need to properly function. This has left many states in a lurch for funding.

    A business nexus is most often defined as having a place of business in a state or having a representative (person) in a state that solicits for your business, but with the advent of the internet and online affiliations & sales, the rules of the game are changing.

    If you have business nexus in a state, generally you are required to register in that state for sales tax purposes, and you also need to remit sales tax to the state (or collect & remit, depending on the state’s laws). Now big businesses won’t be able to skate around that law by claiming no physical presence when they do indeed have people or a business in a state who represents them even if just online or through an affiliated business.

    If you are just realizing you should be collecting sales tax for your state, this post will help you find the info you need on your state’s website:

    US: Sales Tax & Business Registration
    Links to Official Government Websites

    *Amazon is suing NY over their new 2008 sales tax law to try and keep from being required to collect NY sales tax and that’s where the reference to Amazon tax laws comes in. Amazon has affiliates in New York and NY has re-defined nexus to include affiliates located in NY, which means under the new law Amazon must collect & remit NY sales tax on NY-shipped orders because they also ship more than $10,000 a year to NY addresses.

    Other states that have added similar laws have had their affiliates removed by Amazon so that Amazon doesn’t have to collect sales tax for those states until the NY lawsuit is settled (rather than Amazon suing every state who has created a similar new legal definition for a business nexus).

    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Getting a Business Phone


    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    It can come in handy to have a phone number for your small business, but it can be expensive to have a separate land line or cell phone when you are just starting up.

    I’m a big fan of personal privacy so I definitely was not interested in giving out our home number (especially knowing this about tax registration).

    Looking to keep expenses at a minimum we looked to online services and decided to try Magic Jack which has worked well for us:

    http://www.magicjack.com

    It’s a bit cumbersome as a program starting it up (and plugging a phone into the computer) but for less than $75 we got a phone number that’d be just for the business for at least 5 years including a voicemail account and free domestic calls (and free directory assistance, call waiting, three-way calling and call forwarding).

    If we don’t have the Magic Jack phone hooked up or the computer is offline, callers can leave us a voicemail. When that happens we get an email with the voicemail attached that I can listen to right from my email inbox. If I don’t have internet access I can call and get my voicemail using any phone.

    If I need to call a customer, I just plug the MagicJack & phone into the front USB port on my computer and it works like any other phone.

    A free option would Google Voice which wasn’t around yet when we got our phone number through Magic Jack:

    https://www.google.com/voice

    We’ve since gotten a Google Voice account and I’ve used it a few places though I am hesitant to make the number our primary number for business since I don’t know if Google will continue the service or keep it free (and we just don’t need to pay for second phone number for the business).

    It gives you a phone number and free calls within the US & Canada but I’ve never tried to use it to make an outgoing call with it myself.

    One cool thing about Google Voice is that when I get an email about a voicemail it includes a text transcript of the message. It’s sometimes a little off, but it does give me the general gist without having to turn on the speakers for the computer (we like our computer to be quiet–scares the daylights out of me when I use someone else’s computer and it makes noise, LOL).

    Another affordable option through the computer is Skype:

    http://www.skype.com

    There’s a reasonable fee with different features depending on which service you choose. I’ve found their tech support to be difficult (really, no phone support line??), but if the phone line & billing are working well it’s a good tool.

    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    USPS Shipping Rate Charts

    Go To Supplies
    Visit our 2nd Etsy shop: GoToSupplies

    Go To Great Panes, Kathryn Maloney ©2012-2015
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    For a long time I used the USPS Shipping Calculator to check shipping prices, but there is a more efficient way to see what your shipping will cost–the USPS Shipping Rate Charts–even more so now that USPS redesigned the calculator to hide all but the highest priced services unless you know how to make it show the rest of the options.

    You can see the USPS Shipping Rate Charts on these official USPS pages (or see our “Quick Chart Images” below):

    USPS Shipping Rate Charts

    The basic text pages–these are easier for me to read:
    http://pe.usps.com/text/dmm300/Notice123.htm

    The fancy pages–you need to click the name of the service on the left side of the Shipping Charts page to check prices in a chart layout–both domestic & international, plus extra services (otherwise it sends you to the shipping calculator):
    http://www.usps.com/prices/welcome.htm

    You’ll need to know if your packages meet the size requirements for the service & the weight limits, each of the shipping option pages has that info right on it.

    USPS Shipping Discount


    If you are printing your labels with postage through an online service or using the USPS Shipping Assistant with postage stamps to cover the cost (see here for help with labels: Shipping Basics), you get a discount.

    Labels with postage through online services like Paypal get “Commercial Base Prices” for USPS shipments which are better than the retail chart rates you’ll see if you click the “USPS Shipping Rate Charts” link above, plus they get free Delivery Confirmation.

    Labels printed using the downloadable USPS Shipping Assistant using stamps for postage get the regular retail rates for postage but you still get Delivery Confirmation free.

    Quick Charts
    for First Class Package Service
    (Updated for 05/15 rates)


    ~~~ Click images for a larger view–opens in a new tab or window ~~~

    domestic First Class package rates

    (Click for a larger view)


    *DC = Delivery Confirmation, 85 cents when purchased at the retail level.

    Please be sure to confirm all info you get online with official sources to be sure they are up-to-date & accurate. See here for First Class Retail Prices on the USPS website to easily compare them to the First Class Commercial Base Prices. See here for Priority Commercial Base Prices.

    For International First Class, curiously they changed it so that all packages up to 2 oz are the same rate–even ones going to N. American destinations which used to be less expensive:


    International First Class Packages

    (Click for a larger view)


    You can also confirm those rates–as you should all info you get from unofficial sources–in this official PDF download from USPS:
    http://pe.usps.com/cpim/ftp/manuals/dmm300/Notice123.pdf or on their official website here: USPS Price List.

    Need more help? Check out the Shipping Basics page, also linked to from the right sidebar of every page in gold letters.

    Go To Great Panes, Kathryn Maloney ©2012-2015
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Fix for Issue with Etsy's New Shop Local

    Go To Great Panes, Kathryn Maloney ©2011
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Looks like there’s more than one issue with the new shop local:

    1. Some folks don’t see their location pop up when they start to type their location in the box on the profile page.

    If that’s happening to you, try it in another web browser. That seems to have worked for at least some folks. (For example, if you normally use Internet Explorer, try using Fire Fox.)

    2. Etsy has edited shop local in a way that has removed some sellers from the search after they edit their location to meet the new requirements.

    If you’ve edited your location and you can’t find your items when using Etsy’s shop local, you might need to use the same trick we used to get items uploading into Google Shopping again:

    Enable your items

    Thanks to pixiebell for mentioning this fix in the admin thread on shop local, and to TepperWear sharing that info in the bugs section thread.

    What is Use Tax?


    Go To Great Panes, Kathryn Maloney ©2011-2013
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

    Many buyers think that their online purchases are tax exempt, but if their state has sales tax when they purchase locally, they might be mistaken. It’s a common misconception and states are starting to crack down on internet purchases.

    For states with sales tax there is generally a complimentary tax that buyers should be paying called use tax:

  • Use tax is owed by individuals & businesses for items purchased without having paid sales tax that would have had sales tax on it if bought locally. (In some states that also includes tax on the shipping & handling, downloadable goods, services…)
  • Ex: Bought a book online, but the seller didn’t collect sales tax like they would have if you bought it at the local book shop? You owe use tax to the state for that transaction.

    Ex: Bought something for your business that wouldn’t qualify for exemption from sales tax if purchased for your business locally, and the seller didn’t collect sales tax? Then your business owes use tax to the state for that transaction.

    Each state decides what is and isn’t taxable for personal use and for your business use, so the rules about what you’ll owe use tax on varies from state to state–be sure to get the details straight from the state (links to official state web pages here).

  • Use tax is payable by the buyer directly to the state.
  • Many states now allow you to pay the use tax you owe on your state income tax forms in April. You can also you fill out a use tax form reporting the amount you spent that you didn’t pay sales tax on, and send a check with that form to the state with the money to cover the use tax due.

    Links to the forms to pay use tax for many states can be found on the forms & publications pages of your state’s website. Links to many of those are here: Sales Tax-Business Registration

  • Use tax is usually the same rate as sales tax.
  • If that book was $10.00 & your state (and perhaps local) sales tax is 8%, you would have paid $10.80 if you bought it locally. You probably need to remit $.80 as use tax to the state. It’s best to get the details from your state to be sure you are doing it right–some states also tax shipping costs.

  • Use tax is not a new tax–it has been around in most states for decades.
  • Use tax isn’t new, it’s just that until the internet most people didn’t do so much distance-purchasing, so the topic isn’t much talked about.

    In short…:

    Just because you bought it online doesn’t make your purchase tax exempt.

    Use tax is what you owe your state when you should have paid sales tax but didn’t. 🙂

    Go To Great Panes, Kathryn Maloney ©2011-2013
    This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.