Possibly the most important thing for Auctioneers to know about collecting sales tax on Internet transactions is that whatever they know now soon will change.
Before the online age dawned, sales tax collection was simple. Merchants were required to collect sales tax from buyers at the point of sale. When buyer and seller are standing face-to-face, it’s pretty easy to figure out what tax jurisdiction they’re in.
But when an Internet-based business in one state sells something to someone in another state, things get more confusing. So confusing, most states don’t even require businesses to collect sales tax on out-of-state transactions.
That was the case for John Addessi, a Kansas-based entrepreneur who now works as a consultant in the Johnson County Community College’s Kansas Small Business Development Center.
The vast majority of Addessi’s customers were out of the state, and it was their responsibility to pay the sales tax on the goods they bought from him over the Internet.
But that’s soon to change. Inter-state Internet sales tax collection, Addessi says, is coming. The record budget shortfalls many states face has given the issue renewed urgency.
“It certainly is the future,” he says. “States can’t afford to lose that revenue. It’s been worked on for years, and now they’ll try to do it as soon as possible.”
Forty-four states have taken a big step, joining what is known as the Streamlined Sales Tax Agreement, whose purpose is to make sales tax more uniform across the U.S.