The world of e-commerce sales tax has been active of late, complete with high profile legislation that could in the end impact the way sales tax is applied to online retailers across the country. MFA has been vocal about the complex landscape, including a recent MFA article (just click the picture at right to read Four Questions Online Sellers Need to Ask About E-Commerce Sales Tax) and an audio interview with Rosanna DiFilippo, MFA Partner, Keeping Up With Online Sales Tax.

Well, the situation continues to evolve. On May 8, 2008, The New York Department of Taxation and Finance issued TSB-M-08(3)S, which further explains the legislation enacted effective April 23, 2008, which provides a presumption that certain sellers of taxable tangible personal property or services are sales tax vendors and are required to register and collect sales tax.

The new law amends the definition of vendor and provides that a seller is presumed to be a vendor if the seller enters into agreements with New York residents to refer customers to the seller. Specifically, a vendor includes persons who solicit business within New York through employees, independent contractors, agents or other representatives and as a result of, makes sales of tangible personal property or services to New York residents, which are taxable.

A New York State resident for sales tax purposes includes any individual who maintains a permanent place of abode in New York State; any corporation incorporated in New York; and any corporation, association, partnership, or other entity doing business or maintaining a place of business in New York State.

The Department explained that a seller of tangible personal property or services is presumed to be a vendor when two conditions are met. First, the seller enters into an agreement with a New York resident and for a commission or other consideration, the resident representative directly or indirectly refers customers to the seller, whether by link on a web site or by some other means. Second, the cumulative gross receipts from sales to New York customers as a result of referrals by all of the seller’s resident representatives total more than $10,000 during the preceding four quarterly sales tax periods. (more…)

Even without the recent headlines regarding Amazon’s lawsuit against New York, eCommerce Sales Tax has become a pressing issue for companies that sell online. The guidelines differ from state to state, can be extremely complex, and can lead to significant problems for companies that are not up to speed. Rosanna DiFilippo answers some topline questions about the issue.

In addition, we invite you to listen in on an audio interview with Rosanna on MFA’s Thought Leadership page.

Q. Is sales tax for online transactions any different than for in-store purchases?

A. It is often not the type of purchase made but the location of the sale and delivery of items that make eCommerce sales tax complex. Taxation is generally dependant on whether the seller has “nexus” in a state - that is, whether its presence in a region means they are actively doing business there. The trouble is that the guidelines for nexus are not uniform; companies may be subject to sales tax in one state but free from taxation in another.

Q. What are the different guidelines?

A. Guidelines differ from state to state, but here are a few examples:

- In California, sales tax does not apply to the sale or lease of prewritten programs if the product is transferred for download by remote telecommunications from the seller’s place of business to the purchaser’s computer and the purchaser does not obtain tangible personal property (i.e., a CD on which the software program is written).

- In Connecticut, canned, or prewritten software is considered tangible personal property and its sale, leasing or licensing (including upgrades) is taxable at 6%. Here’s where it gets tricky, though: if software is downloaded but no tangible property is transferred, the charge assessed is for computer and data processing services. That means a Connecticut retailer of downloaded software is actually a retailer of computer and data processing services and must register, collect, and remit sales tax of 1%. (more…)