Over $394.86 billion in sales. That’s how much companies earned in 2016 through the Internet, according to Vertical Web Media. Web revenues increased by 15.6% from 2015, a clear sign that more customers are warming up to the practice of purchasing on the Internet.
In response to high online sales, the government is finding ways to boost tax collection. Tennessee Governor Bill Haslam currently issued a rule that requires the collection and remittance of sales taxes of online retailers. If you’re in online business with customers in Tennessee, here’s what you need to know about the Internet sales tax ruling and how a CPA firm can help in properly collecting and remitting these taxes.
The 2016 Tennessee Online Sales Tax Rule
Before, federal law required Internet retailers to collect sales taxes only if they have a physical store or office in the state. Customers who order from retailers out of their state are warranted to pay taxes to the latter’s Revenue Department, but because these purchases are not monitored, only a few make these tax payments. To improve sales tax collection, the new online revenues tax rule applies to all retailers who make more than $500,000 annually in Tennessee.
To illustrate, Amazon pays sales taxes for items bought in Tennessee in 2014, but it does not pay state sales taxes for products sold to Tennessee customers due to a waiver it made with the state government before Haslam. An indefinite waiver authorizes Amazon to not pay for state sales taxes as long as it establishes its initial main distribution centers in Tennessee, which it did. The new Web sales tax rule might revoke or change this waiver.
The public’s reaction to the new rule is divided. Supporters assert that it produces win-win solutions. It results in a level playing field with brick-and-mortar shops as well as boost state revenues. However, opponents believe that the new rule will only increase compliance costs, influence retaliation from other states, and raise possible litigation expenses. They likewise complain of poor protection for small businesses. Complexity and lawsuit concerns underscore the importance of a CPA firm to ensure full compliance.
How a CPA Firm Helps Your Business in Paying Online Sales Taxes
A CPA firm offers services that can improve the accuracy and efficiency of Internet sales tax collection. Apart from being aware of what to collect and how much, a CPA firm already has an organized and improved approach to tax determination and collection. It has sufficient people and systems to navigate the complexities of online sales taxes and manage tax payments. Finally, a CPA firm is experienced in dealing with this tax rule and possible future tax requirements.
The increasing shift toward increased online sales has driven the state to enact a new tax rule which may precipitate additional rules in the future. Such actions heighten the complexity of tax collection and enhances the role of a CPA firm in prompt and efficient modern tax management.
Sources
Tennessee Online Retailer Rule Sparks First Challenge, bna.com
Tennessee online sales tax rule draws legal challenge, knoxnews.com
US e-commerce sales grow 15.6% in 2016, internetretailer.com
Evan Hutcheson, CPA, LLC Ranked as a Top Accounting Firm in Nashville
