I have an online auction site where transactions take place in different states. What should I know about my duties and responsibilities to collect sales tax in multiple states? Do I need to incorporate my online business?
If you are looking to incorporate a business online, understanding sales tax compliance is important. As an online entrepreneur, your duties and responsibilities are much the same as for a regular retail business. Even though you have transactions in many states, all with different sales tax laws, it is not your responsibility to collect the sales taxes for all states. Online businesses are required to collect and pay a sales tax when they deliver products and some services to a state in which they have a physical presence. This usually means having an office, store or other facility; however, if a business sends a sales force into a state, it is also considered a physical presence. Some products or services are exempt. Rules and regulations vary by state and sometimes within the state. Consult your accountant or a tax specialist for more specific information about your state.