Tuesday, 7 May 2013

US Online Tax Rules A Step Closer

The US Senate last night voted overwhelmingly in favour of new tax rules for online purchases.

The Democratic-controlled Senate voted 69 to 27 to support the measures. However, it is expected to face greater resistance in the House of Representatives. 

The rules would enforce state tax laws on spending at US and overseas web sites. It will mean that any retailer selling to US citizens, including online firms in the UK, will be expected to collect tax on the purchase and send it to the state where the purchase was made. 

It has been identified as a potentially 'significant burden' for smaller UK retailers, according to London-based fashion web site Asos at the weekend.  

Republican politicians have raised the issue as a banner against increased taxes and it has also met resistance from online retailers including Ebay. Traditional retailers including Wal-Mart are supporting the change which they say has long since favoured online-only retailers such as Amazon. 

Amazon has resisted the plan until recently when it has begun to open warehouses in individual states to improve delivery speeds. It has now become an unlikely supporter.

At present, shoppers are expected to fill in returns to pay state sales taxes but none do. The legislation will put that obligation on the retailer. Asos said it will add a function onto its site to allow it to add individual taxes on at the checkout stage. 

However, it said the process will have 'many complexities.' Not only do sales tax rates differ from state to state but rules can also vary in cities and state counties. That means UK firms could be faced with completing dozens of returns a month to prevent clashing with the US tax authorities. 

The rules will encompass all retailers will online sales of $1 million or more. Groups such as Ebay and Etsy say that should be increased to $10 million.

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