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Collecting sales taxes from out-of-state customers

On Behalf of | Jun 29, 2021 | Firm News |

Small business owners in Missouri selling products online may have an obligation to collect sales taxes when shipping goods to customers outside the Show-Me State. As reported by CPA Practice Advisor and based on the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., all 50 states can now collect sales taxes from online out-of-state transactions.

Website or e-commerce marketplace purchases, for example, may require adding sales tax to a customer’s order at their home state’s applicable rate. Any state may require a Missouri business to collect, file and remit sales taxes from its customers without a bricks-and-mortar location in that state.

How states may determine a seller’s tax liability

The Supreme Court’s decision established states could collect sales taxes from businesses that have an “economic nexus” within their state. They may also set their own criteria to determine what reflects an economic nexus. As reported by BusinessWest.com, a state may require tax compliance based on customers’ “cookies” or electronic data stored on their computers.

Individual states’ taxation officials may decide to set a minimum value in sales, such as $100,000 within their state during the tax year. They may also require a business to collect sales taxes after reaching a predetermined sales volume within their borders.

A possible exception for small remote sellers

Small remote sellers may fall under an exception to collecting interstate sales taxes. Based on each state’s filing threshold, a Missouri business may not show a large enough customer base or shipped-product volume within a state.

A legal requirement to collect sales taxes from out-of-state customers may result in a business expanding its record-keeping procedures. Maintaining meticulous records of each sales transaction made online, however, may serve to prove or negate compliance with an out-of-state tax requirement.

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