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University of Cebu - Banilad College of Business and Accountancy

This document discusses taxation on internet sales. It explains that according to Solo, the obligation to pay sales tax is determined by the location of the buyer, not the seller, unless the seller has a physical presence like a store or warehouse in the same place as the buyer. A sales tax rate can vary depending on state and local tax laws. It is difficult for states to collect sales taxes on internet sales due to the millions of daily online transactions and risk of losing online businesses. Whether a product or service is taxable also depends on individual state rules.

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64 views

University of Cebu - Banilad College of Business and Accountancy

This document discusses taxation on internet sales. It explains that according to Solo, the obligation to pay sales tax is determined by the location of the buyer, not the seller, unless the seller has a physical presence like a store or warehouse in the same place as the buyer. A sales tax rate can vary depending on state and local tax laws. It is difficult for states to collect sales taxes on internet sales due to the millions of daily online transactions and risk of losing online businesses. Whether a product or service is taxable also depends on individual state rules.

Uploaded by

chiahwalousette
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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University of Cebu Banilad

College of Business and Accountancy


Taxation on Internet Sales
English 6A
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(nline selling and online sho))ing are fa*iliar to the ears of *any )eo)le no+adays&
(nline sellers attract *any )eo)le, es)ecially sho))ers, by offering )roducts in lo+er )rices than
those in the bouti-ues or stores& (nline selling *ay re-uire less effort and fe+er ex)enses since
the seller +ill .ust )ost the )roduct/s and the )rice/s on the +ebsite and that0s it& (n the other
hand, online sho))ing ta1es less effort too& 2ust sit in front of your co*)uter, search for )roducts
and let the seller 1no+ that you0ll be buying their )roduct/s& It0s very convenient to both )arties&
But are you even curious +hy are their )rices *ore affordable than those on stores3 Is online
selling/buying sub.ect to sales tax3 4et0s see if +e can find ans+ers&
According to 5olo, the obligation to )ay sales tax is deter*ined by the location of the
buyer, not the seller& If a business does not have a )hysical )resence in a )articular state, such as
a store or +arehouse, it is not re-uired to collect sales tax for sales fro* custo*ers in that state
65olo, 2anuary 1, #117& In this case, it is only the custo*er +ho is to be taxed, but not all the
ti*e& It0s unless the seller has a )hysical +arehouse or store in the sa*e )lace or state&
A sales tax rate can be a co*bination of state, city, .urisdiction and other tax rates& Also,
de)ending on the ty)e of )roduct, tax rates differ fro* location to location 6Bentru* et al&, ##,
)& #867& The tax rate of a )roduct *ay be different de)ending on state and local tax la+s& So,
+henever a custo*er buys in an online sho) and that sho) has a )hysical store in the sa*e area
+ith the buyer, then the buyer is sub.ect to sales tax& And it0s not the sa*e tax rate that is usually
used by co*)anies& There are a lot of tax rates that should be co*bined but it also de)ends on
the tax la+s of the area&
According to 2ean $urray, states have several )roble*s in atte*)ting to collect sales
taxes on internet sales& These include that it is difficult to *onitor, the *ore aggressive the state
gets in )ursuing this issue, the *ore li1ely it is that they +ill lose businesses, custo*ers can
avoid )aying sales taxes by using a for+arding service, and others 62ean $urray, A)ril #, #87&
So*e states don0t collect sales taxes in internet sales because of the *entioned reasons& It +ould
be very difficult to trac1 all of the *illions of transactions going through the Internet every day
and decide +hich are by co*)anies +ith a )resence in the state or +hich are not& If the state +ill
continue to collect sales tax, online sellers +ill .ust *ove to other state +here there0s no
i*)le*ented sales tax&
If a co*)any has its cor)orate head-uarters and +arehouse in one state, but has its
electronic co**erce transaction )rocessing syste* located on a server in another state 6or even
the sa*e state, but different country7, thus +ould not sub.ect to tax 69reenstein et al&, ##, )&
16:7& So if the seller has a +arehouse or store in the sa*e state +here the buyer is in, then the
buyer is sub.ect to sales tax& But +hen the seller has a )er*anent establish*ent in the sa*e state
as +here the online selling is located, then the buyer is sub.ect to sales tax&
According to the Startu)5ation, each state has their o+n rules regarding +hat is
considered a taxable )roduct or service and +hat is not& ;our )roducts or services *ay be taxable
in one state, but not in another& In so*e states if you se)arately state ite*s on your invoice they
are not taxable, if you lu*) the* together, they beco*e sub.ect to sales tax 6Startu)5ation,
$arch #8, #87& Every state has there o+n +ay on ho+ to handle sales tax collection& So*e
have i*)le*ent tax la+s +hile so*e +ere .ust letting the* continue to gain revenue&
In conclusion, i*)le*entation of sales tax on internet sales de)ends on the location of the
buyer and if the seller has a )hysical )resence in the sa*e location +ith the buyer& It *ay be
difficult to collect sales taxes on internet sales but there are still states that i*)le*ent these tax
la+s&
<(=>I59 BIB4I(9=A?@;
Bentru*, 2ason and <hatley, 2a*es& Buolding e%Co**erce site +ith the &5ET 'ra*e+or1& Sa*
?ublishing& ##& ?ages #86&
9reenstein, $arilyn and Aasarhelyi, $i1los& Electronic Co**erce Security, =is1 $anage*ent
and Control& Second Edition, $c9ra+%@ill& ##& ?ages 16:&
2ean $urray& (nline Sales Tax % Bac1ground and Issues& A)ril #, #8& biBtaxla+&about&co*/
2anuary #, #1C
5olo& Tax on Internet Sales& 2anuary 1, #11 articles&b)lans&co*/ 2anuary #, #1C
Startu)5ation& Eco**erce Sales Tax 11& $arch #8, #8& startu)nation&co*/articles/ 2anuary
#, #1C

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