Do I Have to Collect Taxes for Sales Made Over the Internet?

A Tax FAQ with Mark A. Williams.

If you make a sale over the Internet, generally, if sales tax apply you do have to collect the sales tax. The complication is you might be a business in the state of Nebraska and you might make one sale in the state of Louisiana. If you’re not advertising in that state and you don’t have a business location in that state, generally you wouldn’t be required to collect sales tax there. There is a legal concept called “nexus.” If you don’t have sufficient nexus, you usually don’t have to pay sales tax; however, some states are adopting laws that just require on every sale in that state you do have to pay sales tax. So it’s a very complex set of rules right now that are changing every day because of the growth of the Internet and you need to make sure you have good tax advisers to help you through that process.

© 2014 Parsonage Vandenack Williams LLC

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Does an Out-of-State Retailer Have to Collect Sales Tax?

A Tax FAQ with Mary E. Vandenack.

As a generality, an out-of-state retailer is subject to collecting tax in another state if they have nexus with the state in which they are making a sale. The definition of nexus varies state to state so it’s really important that a business look at what nexus means in a particular state.

In addition, different states tax different types of things so you have to really understand the nature of the business to determine whether you’re going to be subject to sales tax in another state.

© 2014 Parsonage Vandenack Williams LLC

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What Is Nexus?

A Tax FAQ with Mary E. Vandenack.

Nexus is simply the connection, usually considered in the business context, to another state. So what that is looked at for is that a business might be formed and do its primary operations in the state of Delaware, but it also engages in business in Colorado or sends employees into Colorado. We begin to look at what is called nexus to say how much connection that business has with the state of Colorado for purposes of being subject to Colorado laws and Colorado taxes.

Another nexus issue in the employment tax arena is when you send employees into another state, you look at their connection to that state to determine whether they are subject to that state’s payroll tax laws.

© 2014 Parsonage Vandenack Williams LLC

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Understanding the Nebraska Use Tax

A required tax that is often overlooked by both businesses and individuals is the Nebraska consumer’s use tax.  The use tax is a complement to the state and local sales tax.  Sales tax is collected and remitted by the seller or provider of goods, services, and other transactions that occur in Nebraska. Use tax, on the other hand, is generally remitted to the Nebraska Department of Revenue by the purchaser of taxable transactions where no sales tax is collected.  Common scenarios where the use tax applies are:

  • Items purchased on the Internet without payment of Nebraska sales tax;
  • Items purchased out-of-state and delivered to a home or business in Nebraska without payment of Nebraska sales tax; and
  • Items or taxable services purchased in Nebraska without payment of appropriate sales tax.

Use tax generally does not apply when Nebraska sales tax has been paid, when the transaction is exempt from sales tax, or for transactions where sales tax has been properly paid in another state.

Businesses can register for the use tax by filing Nebraska Tax Application Form 20.  Businesses can then report use tax by filing either “Nebraska and Local Sales and Use Tax Return, Form 10” or “Nebraska and Local Consumer’s Use Tax Return, Form 2.”  Individuals must report and pay use tax by filing “Nebraska and Local Individual Consumer’s Use Tax Return, Form 3.”  The filing frequency can be monthly, quarterly, or annually depending on the entity or individual’s annual use tax liability.

Given that the use tax is a self-reporting tax, it is often easy to ignore.  Penalties exist, however, for failing to timely file a use tax return.  Additionally, interest accrues on all unpaid use taxes.  Due to the growing market of online vendors selling goods without collecting sales tax, states are increasing efforts to enforce the use tax.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Requirements to Comply with Nebraska Sales and Use Tax

The state of Nebraska has both a sales and use tax.  Sales tax generally applies to transactions within Nebraska.  On the other hand, the use tax applies when you purchase goods in another state for use in Nebraska and there is no sales tax on those goods when purchased. An example of the use tax applying is in out-of-state Internet or catalog purchases where the vendor does not charge any sales tax.

If you or your company performs services or sells goods subject to the sales tax, or if you become subject to the use tax, you are required to report and remit both taxes to the Nebraska Department of Revenue.  To do so, you must first obtain a sales tax permit.  A permit may be obtained by submitting a Nebraska Tax Application Form 20.  After obtaining the permit, you then begin reporting sales and use tax by filing Nebraska Tax Form 10.  Form 10 must be filed monthly, quarterly, or annually based on the amount of states sales tax collected and use tax owed.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com