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Amazon & You Internet Sales and the Long Arm of the Tax Man

Amazon & You Internet Sales and the Long Arm of the Tax Man

We all have heard or read about the plights of the states in the recent economy. Revenues from all sources are down and states are desperate to increase them. Virtually all states are becoming more aggressive in their collection efforts and many are looking at creative new statutes or ways to reinterpret those already on the books. One prime example of these efforts is the Internet. Most of the news about the Internet currently revolves around Amazon, with some statutes actually being dubbed the “Amazon Laws”. However make no mistake about it; it’s not just Amazon the states are thinking about. If you are selling or buying on the Internet the states have their eyes on you also.

The reasons so many states are looking at Internet sales are because of their explosive growth and the fact that sales or use taxes often go uncollected on these transactions. Experts estimate that the uncollected taxes for these transactions will total $18 billion dollars this year and predict that by 2012 the number will grow to $23 billion. The cumulative amounts for the period of 2009-2012 could reach $55 billion dollars. It’s no wonder the states have their eyes on the Internet; capturing these uncollected taxes would go a long way to closing their budget gaps.

In their pursuit of this Internet treasure the states are taking a number of different approaches. The states easiest to follow are those that have passed new statutes. There are currently 3 of these states that have passed “Amazon Laws”; NY, NC and RI. One of the major components of all three of these statues is what is called “Click-Through Nexus”. This nexus occurs when the seller enters into an agreement with an instate resident, where the resident is compensated for referring customers directly or indirectly to the seller. One form of this is an affiliate program where a potential customer clicks on a resident’s link and is redirected to the seller’s website. The laws are currently being challenged in court and many tax professionals have taken a wait-and-see approach.

While the professionals may be waiting, the states are not. According to BNA’s 2010 Survey of State Tax Departments, 14 additional states believe that their existing statutes allow them to pursue taxes through this “click-through nexus”. The approach of these states is much more stealthy and without the information contained in the BNA survey, many would be hearing about this the first time through an audit. The states referenced in the BNA survey are: Arizona, the District of Columbia, Florida, Iowa, Maryland, Missouri, Nevada, New Mexico, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, and Washington.

In addition to “Click-Through Nexus” many of the states are looking at (or have already passed in the case of Colorado & Oklahoma) “Sales & Use Tax Notice and Reporting Requirements” for transactions where sales taxes are not collected. Quite simply states are requiring sellers without nexus to inform purchasers that tax is due on individual transactions as well as provide year end summaries with instructions on how the taxes should be paid. There are also requirements for reporting these sales to the state and provisions for penalties for noncompliant sellers.

If the new statutes were not enough, states are aggressively searching for companies that have “old-fashioned nexus”. This nexus is caused by the usual myriad of ever-evolving activities whose importance in creating nexus can vary from state to state. Most of these activities are not directly related to the Internet and are conducted by other parts of your company, but could impact the sales tax aspect of your Internet business anyway. These activities are too many to list entirely but here is a quick list of 10 potential nexus-creating activities:

1. Owning or leasing property in a state.
2. Owning or leasing equipment in a state.
3. Travel into a state to perform sales.
4. Travel into a state to perform services such as installations, training, repair, etc, etc.
5. Travel to trade shows in a state.
6. Having payroll in a state.
7. Having agents or contractors in a state.
8. Licensing intangibles to others in a state.
9. Delivery into a state in a company owned truck.
10. Doing business with a bank in a state.

Let’s not forget those issues that are not nexus related. Issues like changing taxability (software especially), delivery methods (downloads vs hard copy) and of course drop-shipping issues. Are you responsible for the taxes on a sale someone else makes? You could be. If your purchaser is not registered in a state and you have nexus in that state you may be liable.
If you are beginning to wonder if you need to take another look at how you are approaching these issues pat yourself on the back. All too often I speak to very smart people at companies of all sizes and types, who work at all levels of the organization that I believe are much too complacent. They assume that if their system has worked up to this point why change it? Some of them are right. They stay on top of the ever-changing environment and update their policies continuously. Others find out the hard way (usually in a Sales/Use Tax Audit), that just because it worked in the past doesn’t mean it’s going to work now.

Andy Johnson, a founding partner at Peisner Johnson & Company, believes that, “The greatest tragedy when it comes to sales tax is neglecting to collect sales tax on a taxable item at the point of sale, only to have it come out of your pocket later. ” Because unlike an income tax which comes out of your pocket no matter when you realize it, sales tax that would have been paid willingly (if not grudgingly) by your customer at the time of the sale, ends up coming out of your pocket 3 to 5 years later. And, don’t forget to add the penalty and interest insult to the injury. Can you afford not to be compliant?

Ok you’ve started to wonder, now what do you do. Here are some suggested actions:

1. Educate yourself – Start with charts and matrices, attend webinars, contact the states.
2. Ask questions – Of your staff, your accountants, everyone. You can never ask enough questions.
3. Evaluate – Don’t assume your accountants or staff are up-to-date. They usually are multi-tasking.
4. Consult an expert – There are some excellent service providers that focus on issues like these.
5. Train your people – Knowledge is power. Empowered employees can help prevent problems.

There are a few good firms that can help you educate yourself or provide additional support as needed. I am partial to my employer Peisner Johnson & Company. We offer many free services designed to make your life easier. One of those free services is that we will provide you with a chart or matrix on just about any topic you would like. We also offer a free service called quick questions. If you have questions that we can answer without the need for research we will do so free of charge.

There are currently so many issues effecting Internet sales it is hard to cover them all or in great detail in a single article like this. It was my intention to alert you to as many of these issues as I could. If you have any questions or would like additional information please let me know. I can be reached at 800-940-9433 ext. 720 or by email at mfleming@peisnerjohnson.com.


Using a Retail POS System For Your POS Solutions

Using a Retail POS System For Your POS Solutions

The retail industry today is becoming more and more customer service based as they move into using a retail POS system that allows for automatic tracking of inventory and notifications when the levels get to a certain point. As these POS solutions are used, more retail stores are finding their employees have more time to help the customers and provide better customer service because they are not forced to deal with inventory issues on a regular basis.

A retail POS system will be helpful for reducing inventory as sales are made, tracking the receipt of inventory when it comes into your warehouse as well as informing you when orders need to be placed for certain products. While there will be a time period when you are adjusting to this retail POS system POS solutions, as you work out any problems you will find that the process is simple and easy to use.

These POS Solutions are based on usually a barcode found on each product. The information that is stored on that barcode will range from number of pieces on hand, retail price and ordering level. As the code is scanned for a sale, the number of pieces are removed from inventory and the price is put into the register or hand held scanner for totaling the customer’s order.

When these products are received, the barcode is scanned using the POS solutions and the number in inventory is increased by the amount that was received in the retail POS systems. If there is a problem with a product, it isn’t returned to inventory but rather placed on a hold list within the POS solutions program where a decision will be made whether to throw it out or if it is in good condition and can be resold.

POS solutions also can give you the ability to see how much of a product you have at any time by looking up the product on the Retail POS system. You will not need to go out onto the sales floor and search for the products. While there are sometimes issues with the accuracy of the retail POS system, you will find that over time many of the problems will work themselves out.

In addition to the inventory issues such as not having product on hand when you need it, a Retail POS System can avoid issues such as increasing the supply of ice cream in the middle of the winter rather than in the middle of the summer when customers are looking to buy that type of product. Using these POS solutions can help with decreasing inventory loss as well as helping you have the products the customers are searching for when they are searching for them.

In the ever-changing environment of the retail industry, customer service is rapidly becoming the largest focus of many companies. Because retail environments need a fast, efficient and accurate method for processing transactions and ordering inventory, many use a retail point of sale system that processes the sale as an inventory reduction and then sends notification when the product levels reach a certain point. Infinity RMS has the perfect solution for any retail business today. Visit them today at www.infinityrms.com to learn more about the programming solutions that they offer.


eCommerce Business

eCommerce Business

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Think of eCommerce and the first few features that strike any mind are – a global marketplace – increased sales – increased profits! Not that you start claiming better margin of profit online, but because various expenses relating to marketing, promotional material, order processing, customer care, inventory management, information storage, telecommunications et al, considerably slash down.

eCommerce offers tempting but economical boost to any size or kind of business. By opting for eCommerce, you can expand your market margins to global horizons or squeeze them to highly focused market segments, as per subjective business acumen and discretion. Even a small-scale business offering quality and reliability with confidence can easily find itself brushing shoulders with its esteemed competitors in least gestation period. It facilitates wishful manifestation of your business entity – as grand and sophisticated as you wish it to be. Budget would not really restrain you here from showcasing your attitude and essence through your website and online shopping cart.

Things considerably simplify with eCommerce – be it changing prices listed on your web page or customization of products; applying innovative business models or business process re-engineering; implementing higher degree of specialization or enhancing productivity and customer care – everything hardly takes time to implement/ incorporate and exhibit.

Not to mention, quality eCommerce services collect and manage valuable customer-related information, including customer’s ordering patterns, to build a comprehensive customer database. This database vitally sharpens your marketing and promotion strategies to be remarkably on target.

As regards your business partners, eCommerce aids you in minimizing supply chain inefficiencies, bringing about reduced inventory requirement and lessened delivery delays, thereby rendering you more confident about your business collaborations with your suppliers and service companies. eCommerce inherently streamlines and automates the entire backend business process, assimilating speed and efficiency to your business activities.

As you introduce eCommerce facility to your customers, you render their shopping experience highly fluent and convenient. eCommerce seems all the more indispensable for your customers in the wake of consistently shrinking time with them to spare for shopping offline. What’s more, online shopping lets your customers reap benefits of online economies, as they often pay lesser price for identical products/ services available offline.

eCommerce-based business benefits the society as well! As your onsite manpower requirement reduces, it lessens the burden on infrastructure and lowers demand for elaborate office complexes and spacious parking lots.

As good as it may sound, eCommerce has its own share of obstacles too that hold it back from assuming it’s full potential. To begin with, Internet in itself is still to touch the lives of a large chunk of people as an integral way of life. There are tangible privacy and security issues that keep people on guard, as they face a dilemma each time they need to divulge highly personal information online, as and when they transact online.

Non-standardized protocols for certain processes, insufficient telecommunications bandwidth and ever-evolving software tools (with incrementing versions), are some of the technical issues that contain eCommerce from being a seamlessly integrated component of the contemporary organizational IT systems.

While technical limitations are completely resolvable, non-technical issues including people’s resistance to change and lack of trust for faceless and paperless transactions, is bound to take its due time before it completely erodes. In fact, eCommerce is fast catching up with the rest of the world, as USA online markets lead them by example.

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