 Sales
tax in online stores
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 Dear
Tax Talk,
We have a couple of retail stores in Michigan and Ohio and we're
thinking of setting up an online store. The online store will be
a separate company owned by my husband and me, as are the two stores.
Does the online store have to collect sales tax on Michigan and
Ohio sales?
-- Amy
 Dear
Amy,
I don't usually get into specific state research
in this column as it is not of general interest. So I'll speak in
general concepts, on where Internet sales tax is headed, and let
you hash out those state particulars with your accountant. Generally,
online retailers have to charge sales tax on orders shipped to customers
in the state(s) in which they operate. Operations include the dealers'
physical premises as well as that of certain agents who act on their
behalf.
Most states have drawn the conclusion that Internet
sales are the same as mail order sales from a catalog. When there
is a related company in the state, the tax authorities look at that
relationship to determine if the operations are integrated. The
greater the integration, the harder it is to say that the Internet
store is not doing business in that state.
For example, if each store is filling the order of
the online retailers with that store's employees and inventory,
the operations are fairly integrated and sales to customers in those
states should be taxed. Even absent common ownership, the activities
of an agent can cause the retailer to be deemed doing business in
that state through integrated operations. For example, Web malls
that attract business for a variety of retailers would be considered
doing business in those states based on their relationship.
Failure to collect sales tax when it is due
can be extremely detrimental. If no returns are filed, the statute
of limitations never expires. With tax rates that approach 10 percent
plus interest and penalties, the results would greatly affect profits.
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