I was recently blessed with a random sales tax audit, yippie!  When I started Zenfolio I  carefully read all the posts and legal documentation for zenfolio I entered my information for the state of IOWA.  From what I understood sales tax was only charged on internet sales done and shipped to the state of IOWA.

well.....folks..... the state auditor has just informed me that ALL my sales done on Zenfolio, through Zenfolio and NEVER fulfilled by me are taxable sales.  She is now requiring me to pay out of my pocket for the total amount that was handled through this site.  I am PEEVED!  If sales tax was to be charged, i would have charged it, now it's coming out of my pocket. She told me that Zenfolio is doing it incorrectly, and that these sales are all the photographers responsibility regardless of who fulfills them.

Of course, we are appealing her decision but in the meantime I have a big headache.

That's amazing. When I first got started doing online sales, I called our local State of Florida guy who handles sales tax. He had worked with my husband's business on other sales tax matters. This is directly with the Department of Revenue in Florida. He informed me, just as your understanding was, that if it was an online sale, regardless of where it was shipped, if I did not handle it in any way, then the online company (Zenfolio, Zazzle, or whomever) was responsible for any sales tax.

If, on the other hand, I had any hands-on participatation with the product getting to the customer (i.e., Mpix printed it and shipped to me and then I packed it and sent to the customer), and the customer was in the state of Florida, then I am responsible for sales tax. If the customer in that situation is out of the state of Florida, I am not responsible for sales tax.

That is the way I have been operating. So, basically for that reason, I do not have anything shipped to me that is going to a customer. Lot less headaches that way for me. I would be interested to see how this pans out for you with the IRS. Sorry to hear about the audit. I don't wish that on ANYONE. Good luck with it all.

I actually just got off the phone with the state of Iowa directly and have contacted the auditor.  The state of Iowa said that if I do not "Bill" the sale from my office then there is no tax liability for me on those sales- regardless of where or who ships it.  for us, it's about who bills it.

We are appealing the decision, but what a mess!  the funniest thing is that my husband is a tax auditor, and he couldn't figure where they were coming up with this!  (he says women shouldn't be auditors cause they get to emotionally involved - but we won't get into that)

thanks for you info, it was exactly what I thought!

That's great news, Rachel. I'm sure they'll get it worked out for you.

Currently, neither the local, the state, or the federal government have a reliable way to track and assign Internet sales. As a result, most have let related taxes slide. But money is getting tight, and when that happens, someone will figure out a way. Sooner or later, the taxman will "come a' callin" and "resistance will be futile"....

It's actually a direct result of Amazon.com and NY.  What happens in NY happens to the rest of the nation...

http://www.kiplinger.com/businessresource/forecast/archive/Copying_New_York_Amazon_Law_080513.html

Many states are changing or have recently changed their tax laws to cover Internet sales.  Unfortunately they are all doing it in different ways making it more and more difficult for everyone to figure out.    Anyone using a service such as Zenfolio would be wise to check their state's sales tax law on an annual basis to avoid getting surprised when the tax man cometh.

In the Zenfolio sales tax page you need to change your setting from "Iowa" to "All" so that it will collect your Iowa sales tax for all sales.