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CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10206
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I'm in Oregon, and I have a friend in Arkansas. He makes

Customer Question

I'm in Oregon, and I have a friend in Arkansas. He makes some handcarved items, and would like my help to sell them. He doesn't have anything set up yet, no business name, no domain, anything. He said he'd split 50/50 with me if I would sell his items. I would be in charge of the web site, money disbursements, etc. I'm also in a no sales tax state.
I'm wondering how something like this would work. Could he ship me the items and I form the joint business here? Or is it easier if I "buy" them at wholesale, and form an ABN here?
Submitted: 1 month ago.
Category: Business Law
Expert:  CalAttorney2 replied 1 month ago.

Dear Customer,
Thank you for using our forum. My name is ***** ***** I hope to assist you today.

Expert:  CalAttorney2 replied 1 month ago.

It sounds like you are forming a business partnership. You can formalize this with a partnership agreement, or even form a business entity (LLC or Corp.).

However, as far as the sales tax goes, you do not calculate sales tax based on the state the sales are made from, but rather the state where the sales are made. So if you are planning on selling items online, be prepared for some rather complex transactions and record keeping as tracking sales across all 50 states gets a little complex (it is not impossible and lots of small businesses do it every day - many do so by using different sales platforms that collect sales tax for all sellers on the site, but if you want everything above board, you need to collect taxes by state).

Customer: replied 1 month ago.
Oregon has no sales tax.
Expert:  CalAttorney2 replied 1 month ago.

I understand. If you only sell your product to Oregon residents, you do not have to worry about sales tax.

But in your question you talked about setting up a website, which usually means the business is going to be selling to people in other states, which is why I provided the additional information.

Customer: replied 1 month ago.
People come here to buy things all the time from other states, we don't charge a sales tax. Why would I charge a sales tax, if my state does not collect tax...that makes no sense.
Expert:  CalAttorney2 replied 1 month ago.

I'm sorry that it does not make sense, but this is very well established law, and it is not at all in dispute. It even applies if you were to be a California resident and traveled to Oregon to purchase an automobile - you would still pay CA sales tax (called a "use tax") on that purchase price.

One argument that tax collectors do use is this: "If a person were to buy a product from a brick and mortar store in my county, they would pay taxes which would go to fix streets, build schools, etc., if they buy the same product online and live in the same county, and the product is delivered to the same county, they should pay that same tax"

Customer: replied 1 month ago.
Well I found several sites that dispute it, so I don't know what to say. If I have the items shipped here, and I sell them here, I am not required to charge a sales tax, except to people in Arkansas since I have a "Nexus" there because of my "warehouse" or supplier there. That's how I read it.
Expert:  CalAttorney2 replied 1 month ago.

Be cautious what you read online. The information you have found is not accurate.

While not exhaustive, this link here is probably one of the more reputable sites.

Customer: replied 1 month ago.
That information is exactly the kind I've been reading.
The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence”—assuming, of course, that the state involved has a sales tax. "
"Generally speaking, a physical presence means having:
* a warehouse in the state (
* a store in the state
* an office in the state, or
* a sales representative in the state.
As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state. "So I read this to mean, since there are no physical presences outside of Arkansas....the only tax that would be charged would be to Arkansas residents...since that would be considered a "physical presence." In any case, I've also consulted my H&R Block tax pro, and she says the marketplace fairness act applies to businesses with a gross income of less than $1 million anyway. No danger there.
Expert:  CalAttorney2 replied 1 month ago.

I will defer to your local tax professional then. I wish you the best of luck with your business venture.

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