Hot Diggety! Leon Towns-von Stauber was rumored to have written: > I work for an ecommerce company in Washington State, which has > recently passed one of those streamlined sales tax laws intended to > collect sales taxes from Internet transactions. More details here: > > We'll be complying with the law's (voluntary) obligations, which means > we need some way of calculating the proper sales tax for transactions > in real time. > > We've already narrowed down some options, but it got me wondering what > else people were using at other ecommerce sites. Do you use > third-party software on a server in your network, an Internet-based > SaaS, or something homegrown? Freeware (if there is such a thing) or > commercial?
Disclaimer: I have not yet begun selling a product, so I can't directly comment on specific tax rate calculator tools. I also can't really speak in absolute terms as things varies based on locality. However, I'd been looking at this topic extensively for the past few months. I quickly came to the conclusion that I would *not* want to 'roll my own', because tax laws are so varied with so many nuances -- you've got to keep 'em all straight -- and they change frequently, also suggesting keeping up with current information can be 'interesting'. These days, with difficult economic conditions and budget deficits, states are increasingly turning to E-commerce-generated tax revenue and enforcement. So in some cases, not having a brick-and-mortar presence (or affiliates) based in a state may not be sufficient reason to not collect either a sales or use tax. This, to the states, is increasingly looking like an easy low-hanging fruit to help in balancing budgets. With that in mind, it does hint that you could potentially be looking at registering with as many as 55-ish different tax authorities (one per U.S. state, territory, and D.C.) and filing appropriate quarterly or annual tax payment forms, each with its own deadlines and reporting requirements. Then you'd also have to take into account things such as tax holiday days where certain categories may be excluded from taxation. Dates and categories varies based on state. If you're caught selling a product without having registered with a state's tax/revenue department, you could be on the hook for a fine and/or criminal charges. For instance, the state of New York fines up to $10,000 and may file a misdemeanor criminal charge. If all that hasn't driven you crazy yet... :-) ...then consider that sales/use tax rates often varies based on county but in some cases, calculating the proper rate based on ZIP code alone can lead to incorrect results because counties' political boundaries don't always map neatly into individual ZIP codes. ZIP codes are really a designation for U.S. Postal Service's mail routing, rather than a reliable indicator of political boundaries -- and political boundares are what tax rates are based on. This one-page sales/use tax rate table based on county in the state of New York explicitly warns about this issue! http://www.tax.state.ny.us/pdf/publications/sales/pub718_808.pdf On top of all that, you may also be on the hook to not just simply send a sales tax report to the taxing authority with a total amount, but also be required to provide a more detailed breakdown of localities. For the state of New York, you have to provide a reporting code corresponding to the particular county of customers you collected sales tax for. That's so they can correctly calculate the total sales tax required. (And if you ever get audited by the state of NY, your sales tax totals for NY had better match this calculated amount to the cent!) Historically, you could usually get away with paying sales tax to only states where you had a brick-and-mortar presence for your brick-and-mortar and online sales. But there's been a major push in the past few years to be more aggressive for revenue enforcement for online vendors without a physical presence in a state selling to residents of a state. New York is the most widely known state (e.g. the Amazon kerfuffle) doing this to out-of-state vendors but there's about a dozen other states ramping up their enforcement now -- and more are sure to follow in short order. Already, there are several states now actively deliberating on this very exact issue, including California and North Carolina, to name a few. So you're treading in a potential minefield here: you have to not just calculate the correct sales tax rate, you also have to keep on top of reporting requirements for potentially so many different jurisdictions such as deadlines and which forms to use, where to mail it to (or how to file electronically). That's also on top of registering with them! I seriously would *NOT* want to roll my own tools for something this complex, logistics-wise. Far too large of a time investment (both upfront and recurring) than I'm willing to make. I also wouldn't know if I could fully trust the free tools' quality of the underlying data or frequency in tracking updates and changes to tax laws. I'd personally go with a reputable provider of tax handling software. Not just for tax rate calculation, but also to keep on top of each state's reporting requirements and deadlines along with a breakdown of numbers needed to file these reports. You also need to keep track of this data in a format that is conducive to an audit, too. Myself, I'd build in the cost of these tools into cost of the product one way or another. While on the topic, here's a link to a list of all 50 U.S. states' tax/revenue authorities' websites: http://www.thestc.com/ta.cgi?STRates The list also includes D.C. and the territories (e.g. Guam). Isn't this fun? ;-) That... and PCI/card processing makes E-commerce such so much fun. ;-) Look at sales tax processing as being part of business lifecycle management: sell product, compute tax, collect payment, document, report, pay authorities, repeat. And being able to pull up data in an auditable format if the authorities or hired auditors does an audit. So you need to think about format of data, how it's broken out, how to compute the tax rate, how to collect payment, how to document it, how to report it, how (and when and who) to pay authorities, and also how to audit it. Keep that in mind when selecting tools to manage this process. I'm sure someone here will be able to pipe up regarding specific software recommendations. It's easier to select the best tool for your needs if you've got a big picture view of the various issues and gotchas regarding the tax situation when evaluating tools. -Dan Disclaimer: DO *NOT* use any of this as legally valid tax advice as it is possible some or any of it may contain bad advice or does not apply to your particular situation. They are merely 'food for thought'. CPAs or tax authorities would be a better source of legally valid tax information. _______________________________________________ Discuss mailing list [email protected] http://lopsa.org/cgi-bin/mailman/listinfo/discuss This list provided by the League of Professional System Administrators http://lopsa.org/
