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Do i have to pay sales tax on an ecommerce business?

What are the rules that govern whether an internet business has to pay sales tax?

  • Specifically, in the instance where the site is selling a virtual good like an e-card- is sales tax levied?

  • Answer:

    It requires a lot more information to answer the question as sales tax laws vary from state to state and even from county to county within a state in some areas.  In New York the rules actually vary from borough to borough within NYC.   First you need to understand the concept of nexus http://needacfo.wordpress.com/2010/10/28/what-do-i-need-to-know-about-nexus/ which determines if a particular state can legally assess sales tax on your business, it basically means does your business have a connection to a particular state, at a minimum you are going to have nexus in the state where the business is physically located. Then you need to understand the sales tax laws for those states where your business has nexus http://needacfo.wordpress.com/2010/09/30/sales-tax/, there is a link to every state's website for the agency that is in charge of sales tax for that state. The good news for you is that most states only tax tangible goods and I think an e-card would probably be considered a service, but that is a general rule and you really need to check the laws for your particular state as there are states that do tax virtual services.

Wray Rives at Quora Visit the source

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pretty much nailed it. I've addressed this elsewhere () It all depends. In general, you can rely on http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota but there are lots of states that are doing everything they can to boost revenues. We've decided to give them the finger until does something that amends Quill, except for states where we clearly have nexus.

Stan Hanks

Taxation of internet sales continues to be an area that states are pursuing to bring in more revenue. This also would apply to affiliate sales where an affiliate merely sends traffic to the company that sells the product. It is changing rapidly. See this website for updates to each state. http://www.salestaxinstitute.com/resources/news

Sonya Graywolf

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