What Will The Congress And The States Do About E-Commerce Sales Taxes?

Tax-news.com, New York

19 May 2000

Professor David Hardesty, CPA, MBA., author of "Electronic Commerce: Taxation and Planning" has updated a long article he wrote last year on the subject of sales taxes and their likely future in the US.

The article looks at four main topics:

• In what states must online vendors collect sales tax?
• What types of sales are subject to the tax?
• What is the most efficient way of collecting the tax?
• What can we expect in the future?

Hardesty says that it is sometimes not easy to tell when an online vendor must collect tax in a state, and that the taxability of new digital products and services is uncertain.

Drawing some conclusions, he thinks that:

'The lack of consensus on what is to be done about e-commerce taxation will immobilize Congress for the time being. While Congress waits, the states will not be idle.'

Professor Hardesty finishes:

'Online vendors must be wary of the tax landscape as they go forward. In many cases, where the rules are uncertain, high-profile merchants should be fairly conservative. Some vendors may find it the better part of valor to cooperate with states and collect sales and use tax, if there is uncertainty as to whether there is a requirement to do so. This conservative approach may be warranted because the downside risk of not collecting the tax is so great. The risk is great because, if a vendor should be found liable to collect the tax states can demand many years of back taxes. Obviously, however, such a decision should be made only after considering the cost of tax compliance, and the potentially adverse effect on sales revenue.'

Read the whole article in two parts at the following links:

http://www.ecommercetax.com/doc/043000.htm

http://www.ecommercetax.com/doc/050700.htm

For more information about David Hardesty's writings, visit http://www.ecommercetax.com/ectp.htm

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