Since the dawn of 2017 there has been a flurry of activity around online sales taxes in the U.S.
International digital service providers need to be aware of this as the potential domino effect of legislative change in the U.S. will have a major impact on business models.
States are now seeking ways to introduce and apply online sales tax legislation. To date the focus has been on how to tax out of state US ecommerce businesses. There has been little discussion on capturing tax revenue from Non US businesses. This could be a matter of time. Here is just a sample of the activity in early 2017, along with some of the reasoning behind each State’s motivation in trying to tax online retailers with no nexus or permanent establishment in the relevant State:
Arkansas: Senate OKs online sales tax bill. Amazon transactions would have generated $32 million for the state in 2014.
Georgia: Leaders push bill to make e-retail customers pay sales taxes. Online sales tax could provide $274 million in revenue for Georgia and $200 million for local governments.
Indiana: Bill would slap tax on online retailers, A 2011 report estimated that lost sales taxes were likely $40 million to $114 million, with a “similar to lower amount lost due to traditional mail-order sales.”
Mississippi: Amazon will collect, pay tax on online sales. Mississippi State officials have estimated levying sales or use taxes on online sales would net the state $300 million a year.
Nebraska: Bills aim to make online retailers pay sales tax. Two similar bills came before a Nebraska legislative committee hearing in January. The Department of Revenue estimates that either bill could generate additional revenue of $30m or $40 million. Tens of millions of revenue expected as Oklahomans start paying Amazon sales tax
South Dakota: Amazon to collect, remit sales tax. Lost sales tax revenue could have contributed as much as $50 million to the state’s general fund.
Wyoming: Senate Committee unanimously advances online sales tax bill. The Wyoming Department of Revenue estimates the state will collect between $23 million and $46 million in taxes annually if the bill becomes law.
This list is particularly interesting as each of these online sales tax developments occurred in the first five weeks of 2017.
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What is more than likely to happen is that the United States will take a federal stance as the current State-by-State approach simply isn’t tenable. When this happens it is highly unlikely that they will simply ignore foreign providers of digital services.
This would be the most significant digital taxation move since the European Union (EU) introduced new place of destination value-added tax (VAT) rules in January 2015.
There is a groundswell of opinion developing in States across the U.S. that will most likely lead to a tipping point on a Federal level.
There is a state of flux in the U.S. right now regarding the future taxation of online sales.
We know every business is different, we use this knowledge to create bespoke solutions for each partner. We will tend to your global tax liabilities so you can continue to sell your services.
Note: Taxamo content is created for guidance only, please consult your local tax advisor.