So my editor at Ecommerce-Guide.com asks me to write a piece on ecommerce stuff you can get for just a few bucks, things like ring tones. While other writers may have jumped at the idea of cyber bargain shopping, I declined. Ring tones just don’t ring my bell, I guess. I asked if she had anything else and she responded that that was the most exciting story she had (in her opinion) — unless I wanted to do a piece on Internet sales tax.

Now I am not an accountant nor am I a finance geek, but I do find taxation to be an interesting (and highly confusing) subject, and the thought of shedding some light on this complex issue excited me. So I accepted the assignment.

You can read the finished article, “Navigating Sales Tax Laws,” by clicking on the article title, by visiting Ecommerce-Guide.com, or going to the Clips page on my website, www.schiffandschiff.com.

For those of you too busy to read the whole article just now, here are five must-know pieces of advice from the article:

1. The primary determinant of whether or not you need to collect and pay sales tax is if you have a physical presence in the customer’s state. Sounds simple enough, right? Wrong. Determining whether you have a physical presence, or a level of activity that would require you to collect — and remit — sales tax, what taxing bodies refer to as “nexus,” can vary from state to state. It may be owning or renting property in that state, having a warehouse or a fulfillment house that maintains inventory for you in that state, having employees in that state or promoting your business in that state through something like a trade show.

2. To learn more about nexus and what your state’s guidelines are for determining it, do an online search with the name of your state and the words sales tax and you should be directed to your state’s Department of Revenue Services. You can also visit the Helpful Information page on the Sales Tax Institute’s Web site. Under “Sales Tax News and Tips” you can click on the topic called “Nexus.”

3. Once you determine nexus, you need to figure out which items in your inventory are subject to sales tax in those states you have nexus in, explains Richard Stim, a Nolo editor, small business attorney and entrepreneur who writes about Internet sales tax. Again, your state’s revenue services/tax-related Web site or the Sales Tax Institute should be able to provide you with this information.

4. You cannot legally collect sales tax without being authorized to do so, which means being registered in those states in which you have a physical presence. “Collecting tax without having a valid license is considered criminal fraud, and you could go to jail,” says Diane L. Yetter, the founder of the Sales Tax Institute and the president of Yetter Consulting Services, Inc. So it definitely pays to register.

5. What’s the worst thing that could happen if you don’t register or file a sales tax return? “If you have never filed a sales tax return and have never been registered for sales tax, the state could audit you,” says Yetter. “The average sales tax across the country is eight percent. So let’s say you did $100,000 of sales a year in a state where you had nexus, where there was sales tax. And you didn’t collect the sales tax. The state could come and get eight percent of that $100,000 plus interest plus penalties for every year you didn’t collect and pay sales tax. That could put you out of business.”

Want to learn more? Read my article. You can also check out the following sales tax-related sites:

» Sales Tax in the United States (Wikipedia)

» The Sales Tax Institute

» The Sales Tax Clearinghouse

» The New Rules Project’s Internet Sales Tax Fairness page

» E-fairness

» The Streamlined Sales and Use Tax Agreement

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