September 05, 2013 /24-7PressRelease/
-- Proposed legislation is making its way through Washington, DC that may allow states to apply a new tax on all internet sales transactions. The federal Marketplace Fairness Act of 2013 was approved by the U.S. Senate earlier this year and is now under consideration in the House. A decision is expected later this year.
Taxation of online sales
Currently, most online shoppers are able to purchase items over the internet without having to pay sales tax, although they may pay a Use Tax. Old laws require that businesses collect sales taxes only on retail goods for items sold in states where they have a physical location, such as a storefront or distribution center. Entirely internet-based retail companies can avoid most sales taxes to out-of-state customers.
Impact on Texas internet businesses
If the Marketplace Fairness Act passes, Texas companies -- as well as others across the nation -- that conduct business transactions
over the internet will be required to collect sales taxes from all out-of-state online purchasers. The new business tax
may also apply to telephone and mail order purchases. This is of great concern to many internet-based business owners for a number of reasons:
- Compliance with sales tax laws in all states who charge sales taxes will be confusing and difficult.
- Additional time spent attending to accounting and billing concerns with retail sales may be cost-prohibitive for a number of businesses.
- Companies will be subject to audits from every location to which they sell products.
While the Act does include a small business exemption -- any entity with less than $1 million in remote sales and without a physical location need not comply with the new tax -- the requirements may result in a disincentive for business growth. Start-up businesses
must also plan how they will handle the proposed changes.
Not all bad news
Brick and mortar companies in Texas may welcome the new law. They have been charging sales taxes all along and view the Act as a way of leveling the retail playing field. States across the nation stand to benefit from passage of the Act as well. Increased collection of taxes will funnel millions of dollars into state coffers on an annual basis.
Few retail businesses, however, fail to take advantage of the convenience of telephone, mail order and internet sales these days and a number of Texas companies are already bracing for the negative impact on their bottom lines.
Consult a lawyer
If you own or operate a business in Texas, consult an experienced business attorney. A lawyer knowledgeable about business taxation, planning, operation and disputes can help.
Article provided by Brown, PC
Visit us at www.brownbusinesslaw.com