Online Web Marketing Revenues and Tax Obligations

Posted by arlene

As a businessperson, there’s probably nothing in the world that gets your knickers in a twist like the thought of paying more taxes. As you prepare to put your Web marketing plan into action, you might wonder, are there any tax surprises waiting for you online? Do you have any special tax obligations from on-line revenues? What about any new IRS Internet regulations that you haven’t heard about? What about local regulations?

If you ship it, who do you pay?

Your on-line marketing efforts really seem to be working. You put your site up only last week and already you have 100 orders for widgets. You’re getting ready to ship the orders from your factory in Wisconsin to customers all around the country. Now you are wondering whether to charge sales tax.

Luckily, state and local governments treat Web sales much the same as mail-order catalog sales. Generally, you have to charge sales tax only on items you ship within the state where you’re located. In other words, if your factory is located in Wisconsin, you charge sales tax only on the widgets that you ship to customers living in Wisconsin. All your other widget customers get a break and pay no sales tax.

Some states are making radical new proposals for increasing their sales tax revenues. These states have decided that the popularity of mail- order and Internet shopping sprees has allowed too many items to be sold without a state sales tax. In general, if an item is shipped to an out- of-state buyer, neither the seller’s state nor the buyer’s state imposes a sales tax. The Internet’s ability to generate a large number of out-of- state sales has state governments holding out their purses and waiting for their share. States are proposing new laws to tax either the buyer or the seller, even if only one party resides in that state.

Federal legislators are considering bans that would prohibit this new tax, some claiming it is not within a state’s jurisdiction to impose such a tax. It is recommended that businesses conducting out-of-state sales keep an eye on any developments in this matter.

No red alter, yet

Wouldn’t it be wonderful if you weren’t required to fill out a slew of new forms enabling the IRS to track your Web transactions? Well, believe it or not, the IRS has not yet issued additional forms for your on-line activities. At this time, the IRS and most state and local governments allow you to lump Web revenues in with all other forms of revenue your company generates. In the future, there may be so-called new media forms to fill out, but for now nothing extra is required. Enjoy it while you can.

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