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Internet Sales Tax Laws

Online sales markets are in a state of expansion as more consumers continue to conduct their purchases online. Indeed, the topic of an Internet sales tax has been in debate in the California Legislature for some time. And now, with the possibility that the federal government may pass the Marketplace Fairness Act of 2013, online sales taxes could change across the country. If you are a consumer who makes purchase online, or a business that conducts sales online, the California Internet sales tax provisions apply to you. Please contact us today to speak with an attorney who can help explain how changing tax requirements could affect your online transactions.

What Is California’s Online Sales Tax Now?

Currently, the standard tax rule in California, and across America, is that online retailers must collect sales tax from customers who are located in states where the online retailer maintains a “physical presence.” Online retailers maintain a physical presence in states where they have a warehouse, a store, a corporate office, or a sales representative. In states where online retailers do not collect an online sales tax, customers nonetheless have a duty to report and pay a sales tax on online purchases. In this case, the tax is a “use tax,” not a “sales tax.” However, these standards differ between each state and for federal taxes. The federal government has also been considering the Marketplace Fairness Act of 2013, which would allow businesses to collect taxes on sales in individual states, regardless of where the seller is located. However, any businesses that are not physically located in a state and make less than $1 million a year would not be required to follow this tax schedule. This law would also require states to reform their current sales tax laws to make online sales tax collection simpler. For California, this new law will not make a substantial difference because the largest online sellers, such as Amazon, already maintain a physical presence in California. Therefore, California online shoppers already pay an online sales tax for most of their online purchases.

What Are the Benefits of Having an Online Sales Tax?

People who support online sales tax argue that enforcing the tax will level the playing field between online businesses and those businesses that do not maintain an online presence. Without an online sales tax, consumers are more likely to purchase products online, which takes away revenue from offline businesses. However, people who oppose such a tax explain that an online sales tax will hurt the country’s overall economy, which continues to struggle. Also, opponents argue that calculating the appropriate sales tax is extremely difficult for online businesses because they have to take into account the buyer’s place of purchase and respective sales tax rates. With different rates in different states, this becomes a daunting task for online businesses that conduct sales across the country.

At the Law Offices of Salar Atrizadeh, we guide our individual and business clients in legal matters regarding all aspects of online transactions by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.