I’m setting up an online shop and things are going well so far but I feel the need to share with an audience just how ridiculous and painful it is to be a good citizen and arrange to pay sales tax in all the states I’m supposed to. For those who’ve been in a cave lately, there’s been a huge push to make all online shops and “e-tailers” pay sales tax just like the brick and mortar stores. Just to set understandings, my attitude is that I consider paying taxes to be one of the costs of doing business. So I’m not trying to avoid it, I just want to do it right. I would like it to be easy, however.
Before you can collect and remit sales tax to a state, you have to register with the state. Why more than one state instead of just the one I’m physically located in? I designed my store to be a collection of carefully curated products that fit my vision. You don’t need to know my vision, just understand that this required that I work with several different drop-shipping companies because my selected products can’t be found in just one distributor. And most states have ruled that a dropshipper counts as effectively “your” warehouse, so if the dropshipper is in their state, they want the taxes from your sales to customers in that state.
There are two states in particular that I found tricky: Arizona and Missouri. What I learned is that in some cases you don’t just register with a state, you have to register with counties and major cities (and reservations in Arizona). Arizona has an online application process, so I worked through it, entering all my business information. Then I got to the page where it told me to select all the cities, counties and reservations I’d be doing business in. I selected all of them because… how am I supposed to know where my future customers will be located? Picked them all just in case. Clicked to the next page and it tells me I need to pay a fee over $250! A registration fee!
Bailed out and did a little more research… I figure out I only need to choose the county or city where my dropshipper is actually located. Phoenix; so I go through the form again and this time pick only Maricopa County. Registration fee is $27. I can handle that. Click to the pay online page and find…
They don’t accept credit or debit cards, registration fees can only be paid by e-check. For cripes sake! So I bail out again, go home and get my checkbook so I can enter the numbers off the bottom of a check, and finish the registration and pay the fee.
Then we get to Missouri. No online form, so I download a pdf and fill it out on my local computer. Only a couple lines down the form I realize they require me to pay a bond. That’s right, I have to submit a bond for a percentage of my estimated sales as security against me not correctly filing sales tax in Missouri. Okay, whatever. They do have a nice online bond calculation tool, so I do that and it’s not a high amount. I keep going.
One the second page of the registration form I stumble again, by the revelation that as an out of state retailer I need to register my business with the Missouri Secretary of State and get a “charter number”. I can’t finish this tax registration without the charter number. WTF? So I follow the breadcrumbs to that agency and see what those requirements are. Wait for it… there’s a fee of $155.
So I need to register with two different agencies in the state and pay two different fees to be awarded the privilege of collecting sales tax for them? They sure don’t make it easy for me to send them the money they feel they’re owed, do they?
So while I stew over this, let me read the rest of the tax registration form. Huh, if you bought your business from someone else, they want to know their contact information as well as what assets were included in the business transfer. Doesn’t apply to me, thankfully, but it’s an outrageous request. Further down… if you’re an LLC (I am), they want the contact information for all of your officers, partners and members. Finally, they want to know in what form I’ll pay the bond: cash bond, certificate of deposit, letter of credit, surety bond.
Haven’t opened my store yet or sold a dollar in merchandise and I already almost want to shut my doors! Okay, well not really. But it does cross my mind that it would be easier to go “la-la-la” and pretend I don’t have a dropshipper in Missouri and hope nobody finds out!