Taxes · Sales

Internet Sales Tax for Online Advertising Services

Edward Heywood CEO of Waffle. MSc Imperial College Business School Graduate. TedX Speaker.

May 7th, 2014

What is the situation in regard to internet sales tax for companies providing a platform on which users can advertise? 

I have a U.K. startup but it is being marketed solely in the U.S. As a result i'm not sure if my company has to pay internet sales tax when advertisers conduct campaigns. What is the standard practice on this? Does it even apply to advertising services?

Really appreciate the help everyone.

David Richardson Owner "I Do Small Jobs" and more

May 11th, 2014

Different states have different rules in the US.  The situation is very fluid and will undoubtedly continue to change.

This issue for states is that tax revenue for state services is shrinking as more and more business is conducted over the Internet and not through brick and mortar stores.  Many (most?) states have rules saying that IF a business has a physical presence in a state where they sell a product, they are required to collect and pay taxes on the sale.

For Amazon.com they have distribution centers in a greater number of states and are starting to cooperate with states collecting and paying the tax.  If people shop across state lines, (interstate commerce) the retailers typically don't pay sales tax.  For online advertising in Texas, if the annual sale amount is below $25 then no tax payment is required.  But that is ONLY FOR BUSINESSES within Texas SELLING TO OTHER BUSINESSES within Texas.

Complicated huh?  I don't think there is one answer for you, no silver bullet.  But since you are in the UK I wouldn't worry about it.  Focus on your service and increasing sales.  If you start making enough revenue you attract tax collectors interest, that is a problem you'd "like" to have..