More tax woes for online businesses

I’ve written several posts on what I call the "ecommerce tax" lately.  But the ecommerce tax is just one tax issue floating around that could affect eBay sellers and online business owners.

There are actually several tax issues that you should keep your eye on if you do business on the net:

1. The first one, and the one that is getting the most attention, is Congress’s push to get the IRS to force brokers (companies such as eBay and Amazon) to report personal data on their customers.  In this proposal, customers who earned more than $5,000 in a year would be reported to the IRS.  This is a concern because some of the smaller brokers may not have the technology in place to keep personal information, including Social Security Numbers, safe.  For more information on what I affectionately call the ‘ecommerce tax’ please see Are You Ready for the Ecommerce Tax? and How to Get a Tax ID Number.

2. State and local taxing authorities are pushing for the ability to impose sales taxes on sales made online.  Currently, online business owners and eBay sellers are not required to collect sales taxes on items that are sold and shipped to customers in another state.  If the state the eBay seller or business is located in has a state or local sales tax, then you are supposed to collect sales tax on items sold and delivered to the same state, but many people are not complying with these rules.  For more information about sales taxes, see the Streamlined Sales Tax Agreement.

3. Finally, the Internet Tax Freedom Act, which prohibits states from imposing taxes on internet service, is set to expire in 2007.  States and local taxing authorities are eagerly awaiting the chance to collect taxes on internet services, but many companies, such as AT&T, Comcast, NetChoice and others, are lobbying for a permanent moratorium on this tax.  More information about making the internet tax moratorium permanent can be found here.

All of these issues could have a huge impact on eBay and other online businesses, so I will be keeping an eye on all of these tax issues and will keep you updated.

For more great eBay tax tips, please read our free special report, Tax Tips for eBay Sellers.

Tags: ebay tax, online sales tax, internet tax, income tax, income tax on ebay

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