Author: David Prichard
Online retail may be a booming industry as more and more of us are choosing to shop online, however for many Australian business who ship their products worldwide this sector brings many additional considerations and vulnerabilities.
One of these is being subject to the ever-changing sales tax laws that govern the country in which their customers reside where the onus is on the business to ensure that the correct sales tax applied. While this may seem simple enough when shipping to a country with a sales tax such as the GST which is applied nationwide, in countries where sales taxes are stipulated state by state ensuring that the correct tax is applied can be more complex and if you’re an Australian business shipping to the US this complexity is likely to increase.
Complicated changes in the US tax regime continue to be hugely significant and problematic for those doing business in the US. The impact is far reaching and has major consequences for Australian businesses selling to the US from both a tax and compliance perspective.
Recent Supreme Court Decision Impact
Since the US Supreme Court ruling in June, every state in the US can now set their own sales tax rate, and these can change on a regular basis. The law applies to all Australian businesses that sell into the US online and means that any of the US States can tax Australian e commerce retailers if they have sales of at least $100,000 from outside the State, and at least 200 individual sales transactions to the State. Marketing activities such as displays ads can also be taxed.
Thirty (30) of the fifty (50) states have already introduced their own sales tax and are working towards effective compliance dates. This means that Australian businesses now have to get registered in each state that they sell into, and then figure out how to plus local sales taxes and collect and file the sales tax returns.
Companies also need to determine the taxability of goods in States where the seller has a collection obligation. Your product might be exempt in some states but not in others, and you will undoubtedly need to invest in new technology, processes and tools to keep up with all the different rates which may not make it financially viable for you to carry on selling your goods to the US. If your business sells good into the US online, you will have to work out if the tax to be paid is based on the product itself, or the State and the County it is being sold into.
Multi State Compliance Complexity
If the US is a crucial market for your goods and services, you will need to take advice to work out how track and comply with the different laws in all 50 states. At the very least it is expected you will have to make changes to your financial and accounting operations and activities to determine your taxability, identify the different tax rates, and make sure you can extricate the information required to file returns. It is worth putting time in now to work out your exposure to these rules, and look at scenarios as they continue to change so you are as best placed as you can be given the circumstances if this market is significant to your business.
Should you have any questions or need assistance in relation to the impact that these changes could have on your business, please call your relevant ESV engagement partner on 02 9283 1666.
