Shopatron Webinar Series How to Simplify Online Sales Tax Introduction Sean Collier Chief Customer Advocate & Co-Founder Shopatron Responsible for client services and large account success HOW TO SIMPLIFY ONLINE SALES TAX Agenda for Discussion ➤ Internet Sales Tax Basics ➤ Tax Rules in the U.S. are Very Complex ➤ Shopatron’s Simple Framework ➤ Fulfillers’ Judgment and Calculations ➤ Evolution of Tax and Online Purchasing Internet Sales Tax Basics HOW TO SIMPLIFY ONLINE SALES TAX Internet Sales Tax Basics All sales are taxable just like in store, catalog, or telephone orders ➤ Tax nexus is the key deciding factor of tax applicability ➤ Shoppers bear the responsibility of paying taxes, businesses are a convenient tax collection vehicle There is no universal sales tax rate/rule ➤ Nor any universal rules on how to calculate tax for individual items Congress can approve tax on out of state orders ➤ But they haven’t and the supreme court will likely rule that it will create a burden on interstate commerce The streamlined sales tax agreement makes tax calculation more complex, not easier. Tax Rules in the U.S. are Very Complex HOW TO SIMPLIFY ONLINE SALES TAX Tax Complexities for Online Purchasing Tax is applicable to all online sales. ➤ That makes things easy ➤ It’s the calculation of that tax that is hard Currently there are over 9K taxing jurisdictions in the U.S. ➤ This does not include tax holidays Complexities in tax calculation arise because of: ➤ Laws imposed by state, city, county, or school districts ➤ Destination tax versus origination tax ➤ Tax code product classification ➤ SSTA - Streamlines Sales Tax Agreement Tax nexus is the key. HOW TO SIMPLIFY ONLINE SALES TAX How Tax Nexus is Determined Nexus is a jurisdictional proposition. It does not constitute whether tax is due or not, rather if a company has nexus with a state, the company can be forced to collect state sales tax or pay state corporate income tax. Simple ➤ If a company has a physical presence in the state, it is said to have a nexus. Complex ➤ Different states have different rules and are constantly shifting to find access to tax revenue. ➤ 37 states believe having an internet server in its state constituted nexus. About half (26 states) take the position that company also has nexus in if it shared space on a 3rd party’s internet server, nexus is created in 24 states if it has data on a leased server, and only 13 states assert nexus if a company uses services of a web hosting provider. ➤ Thirty-eight states take the position that if an employee telecommutes from home, then nexus is created. Of those 38 states, 33 of them believe that one employee doing back-office administrative work is nexus creating and 34 states believe even development functions, such as computer coding creating nexus. Shopatron’s Simple Framework HOW TO SIMPLIFY ONLINE SALES TAX Shopatron Keeps it Simple The fulfiller is ultimately responsible for calculating and remitting sales tax to their state board of equalization. ➤ Each fulfiller in Shopatron already has a process for calculating and remitting their sales tax ➤ This is something retailers do regularly Location is the key to how Shopatron calculates. A single tax rate to rule them all ➤ Store and location level tax rate, just like a walk in customer. ➤ Same as other large selling platforms like eBay. Tax on shipping and handling ➤ Sometimes What about tax holidays or specific product types? Fulfillers’ Judgment and Calculations HOW TO SIMPLIFY ONLINE SALES TAX Fulfillers’ Judgment and Calculations Shopatron allows for fulfillers to provide the tax amount they want to use as an override. Reasons to override: ➤ Shopatron is too simplistic ➤ My accountant needs the tax amount to match against my system HOW TO SIMPLIFY ONLINE SALES TAX Methods of Override HOW TO SIMPLIFY ONLINE SALES TAX Manual Tax Override ➤ Simple interface for line level tax detail ➤ Includes override for shipping and handling tax HOW TO SIMPLIFY ONLINE SALES TAX Automating Tax Override Shopatron can facilitate the fulfillers tax calculation via API. Available Order Download ➤ ItemID ➤ PartNumber ➤ ProdName ➤ option_text ➤ CustPrice ➤ ManufacturerDisc Request Order ➤ developer.shopatron.com/RequestOrders ➤ The amount of tax that will be applied to the item if you fulfill the order. ➤ Can be $0.00. Evolution of Tax and Online Purchasing HOW TO SIMPLIFY ONLINE SALES TAX Tax Evolution Streamlined Sales Tax Agreement ➤ Not all states participate ➤ Does not reduce complexities in tax calculation, makes it harder in some cases ➤ Quill v. North Dakota. Quill prohibits a state from forcing a retailer to collect or pay its taxes unless a company has nexus—a connection with the state. Marketplace Fairness Act ➤ Far from settled, recent publication by House Judiciary Committee ➤ Does not reduce complexities in tax calculation ➤ Could be considered a hindrance to interstate commerce by Judiciary Widespread Use Tax ➤ Moves burden from retailers to consumers ➤ Kentucky taxpayers to pay “Use Tax” on all out-of-state purchases 14/11/2013 HOW TO SIMPLIFY ONLINE SALES TAX Amazon’s Tax Footprint HOW TO SIMPLIFY ONLINE SALES TAX Where are Purchases Taxable? HOW TO SIMPLIFY ONLINE SALES TAX Current Sales Tax Averages by State Questions? If you have any additional questions, please contact your Account Manager or Merchant Support Services.
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