Sales tax issues hitting online sellers

On Behalf of | Nov 15, 2019 | Sales Tax

A small business owner in another state — who focuses on selling products online through Amazon — recently received a tax bill that has turned his whole world upside down. He supposedly owes roughly $1.6 million in sales tax to the state of California because his product was stored at a facility there. He is currently fighting the matter, as he claims the storage location of his items was not made known to him, so it is unclear how his story will end. His experience, though, can serve as a cautionary tale for Connecticut residents who are also online sellers.

More states are going after sales tax for products sold online, so this tax bill is not entirely surprising. However, the amount being sought in this case is extreme, and the state seeking it is not even the seller’s home state. It is simply the state Amazon chose to store his product. Retailers on Amazon have no say in where their product is kept.

The need to collect sales tax for online sales depends on several factors, including the type of product sold, where the product is stored, where the seller lives and where the buyer resides. It is up to online sellers to find out if they are required to collect sales tax and to whom they must remit it. Those who do not obtain this information and start collecting sales tax chance ending up in the same boat as the individual mentioned above.

Sales tax rules are always changing. They can be challenging to keep up with, particularly for small business owners. Failing to learn and follow the rules can result in a tax audit. Connecticut residents who have found themselves facing outrageous sales tax bills or tax audits can turn to legal counsel for assistance with resolving the issue.