December 4, 2013

Internet sales tax Q & A


Q: What does the Supreme Court’s decision mean?

A: By choosing not to hear the case, the court sent a message that it does not see any significant constitutional problems with state laws that require online retailers with affiliate-marketing programs to collect state sales tax. One such law was passed recently in Maine, and as a result, Amazon and discontinued their affiliate marketing programs in the state. 

Q: When do I, a Maine resident, pay sales tax and when don’t I?

A: You pay sales tax on goods purchased at brick-and-mortar retailers and online retailers that have a physical presence in the state, including stores, a sales force or marketing affiliates. You do not pay sales tax on goods purchased from online retailers that have no physical presence in Maine. For instance, if you buy an item on Target’s website, you pay state sales tax because the company has a store in Maine. 

Q: What could change down the road?

A: A bill has passed in the U.S. Senate and is awaiting a vote in the House that would force all online retailers to collect state sales tax, regardless of whether they have a physical presence in a state. If it passes, every online retailer with annual sales of $1 million or more would begin collecting state sales tax.

Q: Who wins and who loses?

A: If the bill becomes law, brick-and-mortar retailers could see more customers who might have previously shopped online to avoid state sales tax. Also, Amazon and Overstock affiliate-marketing programs would return to Maine as a source of revenue for website owners. The state would benefit from an anticipated millions in additional tax revenue generated from online sales.

The losers would include online retailers, who would lose a competitive advantage over brick-and-mortar stores, and consumers who buy goods online because they would have to pay the added tax. Maine residents are required by law to pay a state use tax on all online purchases, but the law is not strictly enforced.

– J. Craig Anderson

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