Navigating The Internet Sales Tax Laws

QUESTION:
I have been contacted by my local city government to say that my business is scheduled to be audited to determine if I owe any sales tax from items purchased on the Internet. Can they really make me pay this tax? I thought you could buy things online tax free? -- Katie R.

ANSWER:
I hate to burst your internet bubble, Katie, but they are within their rights to audit your business and demand payment of sales tax on items purchased on the Web.

Internet sales taxation has been a topic of contention even before Amazon sold its first book and Priceline booked its first flight.

One of the more controversial points is that no one, including our own government, seems to have a clue how to implement a fair and logical Internet taxation process.

With over 7,500 different local, county and state taxation systems in the United States, you can understand the controversy. In 1998, Congress did what it usually does when faced with a potentially explosive issue like Internet tax collection -- it decided to put off making a decision. Congress enacted a three-year moratorium on the collection of taxes to give an appointed advisory board time to come up with an acceptable solution.

That moratorium ended last year and opened the door for municipalities to begin collecting sales tax on their own.

Here in Alabama the sales tax collection department is airing radio spots asking Alabamians to step up to - and toss dollars into - the proverbial collection plate. The commercial kindly suggests that if I have purchased anything from an online retailer, I am honor-bound to proclaim such purchases and submit the appropriate sales tax to the collection department right away. They thank me in advance for my cooperation.

So, Katie, when the auditor shows up at your door the best thing you can do is smile politely and be totally forthcoming. The sales tax that you pay is a small price for the convenience of shopping online.

Now where did I put all those Amazon.com receipts?

Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim's latest books include "Small Business Success Secrets" and "The 30 Day Blueprint For Success!" Related Links: http://www.smallbusinessqa.com http://www.dropshipwholesale.net

In The News:


Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Knock-Knock-Knock

Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax... Read More

The Implications of Income Tax Charge on Estate Planning

OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters

The IRS has obtained civil injunctions against more than 100... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

Income Tax Returns Your Accountant Should Not File

You've been feeling uneasy (perhaps even guilty) because you've failed... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

Section 179 ? Tax Relief From Depreciation Rules

"Depreciation." For business owners, this word is the one most... Read More

To Tax or Not to Tax - This is the Question

To tax or not to tax - this question could... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Know A Tax Cheat? Get Paid To Tell The IRS

According to the IRS, taxpayers underpay their taxes by some... Read More

Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help.... Read More

Getting A Second Extension to File 2004 Taxes

Millions of people file tax return extensions every year. The... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

The Annual Gift Tax Exclusion: Getting The Edge

Whether helping the kids with a down payment on their... Read More

Small Business Tax Deductions for Year End 2004

As a small business owner, it's wise to familiarize yourself... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Tax Secrets - How Drew Miles Helped Me

How about a Tax Tip?As we all know Taxes are... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More