You’ve probably heard about various legislation that is working its way through the government in the USA. Today, I wanted to take some time to let you know what exactly is going on – and how it affects you as a craft business owner.
Current Sales Tax Laws
Under current Federal laws in the United States, sellers are required to collect and remit sales tax to states where they have nexus. Nexus is a fancy term that means that the business is registered in that state. For example: As a business based in Florida, I am required to collect sales tax from buyers in Florida and remit it to the state of Florida. If my business also had a warehouse in Texas, I would be required to collect and remit sales tax in Florida and Texas. Similarly, if I were based in North Carolina, I would be required to collect and submit sales tax in North Carolina. For more information about sales tax, see this post on the blog. If you’d like an affordable service to keep track of your sales tax, head to this post.
The Problem with the Current Laws
Under the current laws, states feel they are missing out on sales tax collection when internet purchases are made from out of state.
Current Federal Legislation
The legislation below are proposed acts to change the federal laws. I’ve provided a link to each if you want to learn more about them. It’s important to note that none of these acts have been passed into law as of April of 2018.
- The Marketplace Fairness Act
- The Remote Transactions Parity Act of 2015
- The Online Sales Simplification Act
Current State Legislation
Since none of the acts above have made it through Congress and been turned into law, states are busy creating their own laws regarding sales tax on internet purchases. The states that you need to know about right now are Washington and Pennsylvania. Here’s why:
- Washington (state, not D.C.) has passed laws for internet sales tax. Here are the important facts: 1) If you sell more than $10,000 per year to Washington State residents you must remit sales tax in the state whether or not you have nexus there. Or, you must submit a tax notice to all Washington state buyers about the taxes they owe. 2) Marketplaces (like Etsy and Amazon), must collect sales tax on all purchases to Washington. They must remit the sales tax owed to the state on behalf of sellers. Currently, both Etsy and Amazon do this at no charge to sellers. For more information about remote seller taxes in Washington, visit this link.
- Pennsylvania, like Washington, has similar internet sales tax laws. Here are the important facts: 1) Pennsylvania also operates on the $10,000 per year to Pennsylvania sales tax requirement as Washington. So, if you sell more than $10,000 per year to Pennsylvania customers, you are required to remit sales tax whether or not you have nexus in Pennsylvania. The other option would be to submit a tax notice to your customers in Pennsylvania. 2) Marketplace facilitators (like Etsy and Amazon) are required to collect and remit sales tax for all Pennsylvania purchases. Again, both Etsy and Amazon are collecting and remitting sales tax to Pennsylvania with no charge to sellers. For more information about remote seller taxes in Pennsylvania, visit this link.
Other states have legislation underway regarding how internet sales are handled in their states. I urge you to keep your eyes on sales tax information that affects you as a small business owner.
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