First, and to be clear, AHS product pricing DOES NOT include any import duties, tariffs or taxes. We separately charge, collect and remit Arizona State Sales Tax on sales made ONLY to customers in Arizona.
Currently, if you reside anywhere in the U.S. outside of Arizona, then you are responsible for sales taxes as might be due to your local government. It is your responsibility to “self declare” and pay what is due. If you reside outside the U.S., you most likely already pay taxes due upon delivery.
A major issue now entering into the world of online retail sales is that many countries, states and local governments (i.e. taxing authorities) around the world are adding new regulations that shift the burden for the collection of sales tax (VAT, GST, HST etc) onto the “offshore” or “out of state” retailer. This has the potential to be a major game changer, and not in a good way.
International Import Duties, Tariffs and Sales Taxes
Most countries have removed import duties, or tariffs, from their tax laws in an effort to appear to support “Free Trade”. Sales Taxes are, however, fair game, as these generally apply equally to domestically produced and imported products. Generally, each country would work with the international shipping companies (Post Offices, FedEx, UPS, DHL, etc) to have each mail item “clear customs”, where the legality of an import is checked, then any taxes due are calculated and collected from the recipient on or before delivery. That’s how it used to work, and still does in most cases. But in an increasing number of situations, the rules are changing.
Some countries are now attempting to shift the burden for collecting and remitting their taxes to the offshore retailer. I’m not quite sure how a government in another country can require me to collect taxes on the their behalf (and without compensation), but some are trying. They say it is for the “privilege” of selling to customers in their country. Australia, for example, now requires that if I make annual sales to Australian customers exceeding AU$75,000 I must register with the Australian Taxation Office and collect a 10% GST. Fortunately for the moment I don’t come anywhere close to that threshold, but here’s the dilemma: There are how many countries on planet earth? Is there any uniformity? Hell no! So I have to research how many country’s sales tax laws? Oh, and these laws can be changed any time they like, and exchange rates change on a daily basis. So how often do I have to repeat that research effort?
To get an idea how obstructive this is, ask Australians if they can make purchases on the U.S. Amazon web site. Last I read (uh oh… more research), and specifically because of this issue, they are blocked from doing so by Amazon. They get redirected to the Australian Amazon site, with significantly less product choice and selection.
Sales Taxes – U.S. Domestic
Prior to June 21st 2018, you, the US Customer, were required to “self declare” a purchase from an out of state retailer, and if sales tax (or not enough sales tax) was collected by the retailer, you were required to pay it yourself to your state tax authority.
On June 21st 2018, the US Supreme Court ruled in the “Wayfair vs South Carolina” case removing the previous requirement that a business have a “business presence” (often referred to as a “Nexus”) in a state before the business could be required to collect sales taxes. No more. What we have now is a regulatory burden of potentially gargantuan proportions in that any state with a sales tax can require out of state businesses to collect and remit their various sales taxes. Well, you say, there are only 50 states. Not quite that simple. Many counties within those states, cities within those counties, and “special taxation districts” can and often do add their own sales tax. Where I live in Arizona, for example, there is a state, county and city sales tax. I am told by people in the know that there are upwards of 10,000 taxing entities in the U.S. So I have to know which taxes apply to every customer (state and city I can identify, but county and “special districts” are a bit of a problem) and then research and understand 10,000 sets of tax laws? Do i tax shipping? In some jurisdictions it is subject to sales tax, in others it is not. Then I have to prepare, document and file 10,000 annual sales tax returns? Oh yes, again, these 10,000 entities can change the rules at any time! More research. Really ??!!!!
Now, if our wonderfully efficient federal government would get on the job and pass a set of laws (the do have the constitutional right to do so) that would put some controls on this – e.g. one tax rate for an entire state, returns filed a maximum of once a month (1-12 times a year), a “minimum” threshold for sales before taxes are required to be collected. Nope. We’re waiting. But the states are not, and so far about half have passed their own laws. Most allow a business with less that 200 sales AND less than $100,000 in gross annual sales to be exempt. But not all. Idaho and Oklahoma is $10,000. Minnesota is 100 transactions. Some states also say these limits apply in the year preceding the date of the current sale, meaning not a calendar year, but the 365 days before this latest sale. Now there’s a fun wrinkle to keep track of!
How does this affect you, my customer?
First, I appreciate the business sent my way by every customer, domestic or international, small order or big. Thank You!
That said, I have no desire, interest or wish to collect sales taxes on behalf of any entity except the State of Arizona. No choice on that one. The complexity of regulation, the time it would devour to be compliant and to file those returns is quite simply more than I can allow. If a single set of rates for an entire state do get set, and if the filing thresholds and requirements are reasonable, I will reconsider.
So I am now “counting” orders by country (where I know they are trying to extend collection to me) and by state for US customers. I count both number of orders and total $$ value. If (when?) I reach 90% of a tax entity’s annual threshold (either order quantity or total $$ value), I will cease accepting orders from customers in that country or state for the balance of the calendar year. Two reasons: First, most make tax collection retroactive back to the first sale (but I didn’t collect tax!), and secondly I simply don’t have the resources (time!) to do all the paperwork required.
How likely is it that I will cross that line? Only California currently comes close for the number of transactions, so for the moment this is really just an interesting philosophical discussion. But laws can change…. and politicians are always looking for new sources of revenue…. and what easier target is there than an out of state business that has no voice and cannot vote for them?
Below is a table that shows the out of state collection thresholds for the U.S. states that have, so far, implemented laws on the subject. If your state isn’t on this list, don’t feel left out, I am sure it soon will be.
U.S. States with Online Sales Tax Laws
Source: Internet Retailer, November 2018
|State||Sales tax collection start date||Minimum sales thresholds|
|Alabama||Oct. 1, 2018||$250,000|
|Arkansas||Jan. 1, 2019||$100,000 or 200 transactions|
|California||April 1, 2019||$100,000 or 200 transactions|
|Colorado**||Dec. 1, 2018||$100,000 or 200 transactions|
|Connecticut||Dec. 1, 2018||$250,000 or 200 transactions|
|District of Columbia||Proposed||$100,000 or 200 transactions|
|Georgia*||Jan. 1, 2019||$250,000 or 200 transactions|
|Hawaii||Dec. 1, 2017||$100,000 or 200 transactions|
|Idaho||July 1, 2018||$10,000|
|Illinois||Oct. 1, 2018||$100,000 or 200 transactions|
|Indiana||Oct. 1, 2018||$100,000 or 200 transactions|
|Iowa||Jan. 1, 2019||$100,000 or 200 transactions|
|Kentucky||Oct. 1, 2018||$100,000 or 200 transactions|
|Louisiana||Jan. 1, 2019||$100,000 or 200 transactions|
|Maine||July 1, 2018||$100,000 or 200 transactions|
|Maryland||Oct. 1, 2018||$100,000 or 200 transactions|
|Massachusetts||Oct. 1, 2018||$500,000 or 100 transactions|
|Michigan||Oct. 1, 2018||$100,000 or 200 transactions|
|Minnesota||Oct. 1, 2018||10 retail transaction totaling $100,000 or 100 retail transaction|
|Mississippi||Sept. 1, 2018||$250,000|
|Nebraska||Jan. 1, 2019||$100,000 or 200 transactions|
|Nevada||Proposed||$100,000 or 200 transactions|
|New Jersey||Nov. 1, 2018||$100,000 or 200 transactions|
|North Carolina||Nov. 1, 2018||$100,000 or 200 transactions|
|North Dakota||Oct. 1, 2018||$100,000 or 200 transactions|
|Oklahoma||July 1, 2018||$10,000|
|Rhode Island*||Aug.17, 2017||$100,000 or 200 transactions|
|South Carolina||Nov. 1, 2018||$100,000|
|South Dakota||Nov. 1, 2018||$100,000 or 200 transactions|
|Tennessee***||Pending further legislation||$500,000|
|Utah||Jan. 1, 2019||$100,000 or 200 transactions|
|Vermont||July 1, 2018||$100,000 or 200 transactions|
|Washington*||Jan. 1, 2018||$100,000 or 200 transactions|
|West Virginia||Jan. 1, 2019||$100,000 or 200 transactions|
|Wisconsin||Oct. 1, 2018||$100,000 or 200 transactions|
*Rhode Island, Washington and Georgia allow retailers to include a statement telling customers to submit sales tax in lieu of collecting the tax; those retailers must send Georgia customers with more than $500 in purchases a tax statement each year; in Washington, retailers with more than $100,000 in sales to the state must collect tax
**Colorado has a grace period that will run through May 31, 2019
***Tennessee signed an online tax legislation into law, then passed another law prohibiting enforcement of the passed law
So What is Being Done About This?
Small business advocacy groups are actively lobbying Washington to pass a Federal statute that will (hopefully) bring this monster down to something manageable and fair. Sales Taxes are a fact of life, and the various governments have the right to collect them. It’s the burden being placed on small business by these laws that needs to be addressed.
What can you do? Call your local politicians!
Politicians generally ignore a situation until the volume of complaints on a subject get to be too much. No point messing with city or county governments on this. Small potatoes. Call your elected representatives at your highest (e.g. Federal) government level, and at your State level. Let them know how this is affecting you, their citizens and their voters. Then call them again tomorrow, next week, next month. Just maybe they will listen and will do something about it to make the system manageable. Maybe.