Fast growing internet fashion site Asos has confirmed concerns we have raised on the site that the ripples would reach here sooner or later. It has said today it was already preparing for a change in the law by re-engineering its site to stay ahead of US tax laws.
Tomorrow the Senate is expected to pass a law that could ultimately force UK firms to collect taxes on behalf of US states. From the Senate, the legislation will pass to the US House of Representatives where it will be further debated later this year.
At present, state sales taxes on internet shopping are supposed to be declared and paid for by consumers on individual tax returns directly to the state in which they live. The Marketplace Fairness Act will shift the burden onto online retailers. If the obligation were made monthly then it would potentially require dozens of tax returns a month sent over to the US.
Senior British e-commerce sources we have spoken to believe it could take some time to implement the tax proposals. They say the earlier the problem is dealt with the better.
Asos has clearly concluded that, although the row is politically far from decided, it does not want to be caught out if legislation is passed though quickly. When this kind of thing has happened in the past, US law enforcement agencies generally don't give much quarter. See the changes to online gambling laws that came in overnight in 2006 and the arrests of UK-based executives that followed.
Apparently, our sources say, some other large retailers in the UK with reasonably sized US customer bases are taking a more relaxed approach and have done very little about it. The issue has barely hit their radars, in fact. No fingers pointed but but they include a number of large high street names.
An Asos spokesman told The Mail on Sunday's business pages: ‘I can see this having many complexities. For smaller retailers the cost could be significant. There will also be a compliance burden that might mean a small company doing a tax return every month to fifty different US states.’
Asos is going to add a facility onto its US sites that will enable it to collect the tax if and when the change comes into force.
Asos is going to add a facility onto its US sites that will enable it to collect the tax if and when the change comes into force.
The paper says that other firms with sizable or growing US sales revenues are Marks & Spencer, John Lewis, Next, Burberry, Boden, Net-A-Porter, Jack Wills and Ted Baker.
The new rules will require any retailer with online sales in the US over $1 million (£642,508) to comply. That could mean businesses operating through marketplace sites like Amazon and Ebay.
The new rules will require any retailer with online sales in the US over $1 million (£642,508) to comply. That could mean businesses operating through marketplace sites like Amazon and Ebay.
Each state charges different sales tax rates and US customers are used to seeing the addition on their receipts when they arrive at checkouts so it is not clear how the change would affect their shopping habits, the piece says. Some areas have a zero rating while New York, the highest, charges around 12 per cent. Cities and counties within states charge different taxes and different product also have different rates.
To complicate matters further, rates on products often don't kick in straight away. New York does not charge tax on clothing spend of less than $55.
For Asos most of the expertise to deal with this will already be in the company while for smaller firms it will not. The burden on them will, relatively speaking, be significantly higher.
The Marketplace Fairness Act is expected to face significant opposition from Republican anti-tax lobbies as it heads for the House of Representatives. But supporters include President Obama, Wal-Mart and that other retail giant Target. Amazon, as we have discussed elsewhere and for its own reasons, is also a supporter.
Other lobby groups and firms such as Ebay and Etsy have argued the revenue threshold should be higher at $10 million.
Either way, the sooner firms come up with solutions - even if its just to consolidate the issue in their plan for now - the more likely they are to deal with it when and it happens.
To complicate matters further, rates on products often don't kick in straight away. New York does not charge tax on clothing spend of less than $55.
For Asos most of the expertise to deal with this will already be in the company while for smaller firms it will not. The burden on them will, relatively speaking, be significantly higher.
The Marketplace Fairness Act is expected to face significant opposition from Republican anti-tax lobbies as it heads for the House of Representatives. But supporters include President Obama, Wal-Mart and that other retail giant Target. Amazon, as we have discussed elsewhere and for its own reasons, is also a supporter.
Other lobby groups and firms such as Ebay and Etsy have argued the revenue threshold should be higher at $10 million.
Either way, the sooner firms come up with solutions - even if its just to consolidate the issue in their plan for now - the more likely they are to deal with it when and it happens.
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