Sales Tax & E-Commerce - Part 2

In Part 1 of this article, we looked at two issues of sales tax and e-commerce. These issues were, determining when a seller must collect tax, and the products and services that are taxable. We learned that it is sometimes not easy to tell when an online vendor must collect tax in a state. We also learned that the taxability of new digital products and services is uncertain. In this second part we examine the remaining issues. We look at how online vendors collect tax in e-commerce, and what we can expect in the future. We will also briefly review the politics of sales tax, and what online vendors can expect from Washington, and from state and local government tax collectors.

Collecting Tax Online

Online sellers take a variety of approaches to collecting sales and use tax. Some collect no tax in any state, either out of ignorance, or a belief that collection will not be enforced. Some vendors manually figure the amount of sales tax due on a transaction. This method is disadvantageous to the buyer because the buyer, after giving a credit card number, does not know the final bill for a purchase. Some vendors program the Web site to calculate and collect tax on sales to buyers in states in which the vendor has nexus.

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