Question from Charlott King

1. The first question seems to be a tax question and the second question relates to the application of interstate commerce law. The first question is: (1) Does the company need to pay sales tax to the state of Alabama on the sale of goods that are being shipped out of Alabama, but that are not international sales so as to qualify under the exemption for international transactions?; and (2) Do the US interstate commerce laws have “control over shipping”? Whether or not “interstate commerce” has control over shipping is not applicable to the tax question. These questions do not involve the international shipment of goods, but are strictly USA-related state taxation issues. If the goods are bound for an international destination, they are exempt from sales tax in all 50 states of the United States of America. With regard to sales by a US company to a buyer in another US state, the laws are unclear and rapidly changing.

   California has just been made clear that sales by companies like Amazon.com who sell to citizens of California over the Internet must collect and pay California sales tax on transactions they ship to California, regardless of where the seller is located, because they view the sale of goods to have been made in California. This has to do with Internet law and the situs of the transaction, which is deemed by the State of California to be the computer terminal of the buyer and not the computer terminal of the seller.

   It is a hard stretch to believe that if a buyer communicates a purchase order electronically through a computer, or whether they do it by US mail or through a fax machine, that it would have any effect on whether or not state sales tax is due on out of state sales. However, the recent holding in California regarding Amazon.com sales made to Californians seems to be the first step in allowing the long arm of the state’s tax man to reach across state borders by designating the situs of the transaction to the computer in the state from which the buyer ordered. However, each state is treating sales taxation differently and the laws are evolving rapidly. In some instances, even when a retailer does not collect sales tax, the consumer may still be required to pay it.

   An example of when interstate tax laws are important is when a consumer in Indiana buys a book from on online retailer headquartered in Vermont. Traditionally, as long as the retailer has all of its facilities in Vermont and collects payment in Vermont, the consumer does not have to pay the Indians state sales tax. The purchase is also exempt from Vermont sales tax laws. However, California law just changed that with regards to Internet sales, where it is the situs of the buyer that controls which sales tax will be paid.

   In 2002, the Streamlined Sales and Use Tax Project Agreement (SSUTA) was organized by 40 states and the District of Columbia. This agreement between state governments simplifies their tax codes in order to facilitate tax collection. Although sales tax collection remains voluntary under SSUTA, many states have already changed their tax laws to conform to the act. The SSUTA has also prompted many national retailers to negotiate with member states for amnesty deals. In return, the retailers promise future collection of sales tax.

   Whether the sale of goods ordered through the internet are subject to state sales tax is a question of Alabama state sales tax law and the Alabama taxing authority or a lawyer knowledgeable about taxation law in the state of Alabama should be consulted to answer this question specifically as it applies to Alabama.

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