One of the few disadvantages of doing business online is the fact that as soon as a business is online, they are subject to the taxes of multiple areas since almost anyone can access the site. There are three types of taxes that most businesses are impacted by: income taxes, sales taxes, and property taxes. For businesses on the Web, they mainly have to worry about the income and sales taxes.
Nexus is the connection between the governing body and a tax-paying entity that does business in the geographic area that the body governs. Determining nexus is harder when a business only conducts a few transactions in a particular location; in this case, it is best to seek the help of a professional tax advisor. Determining nexus in other countries is determined in differing ways depending on the location.
Any Web site that is created in the U.S. and makes a profit is subject to U.S. income taxes as well as on profits made in international sales. Some companies receive a credit for taxes paid to international governments. Businesses that perform transactions among multiple states are subject to the taxes in each state and must file taxes accordingly. Those companies that do business online usually do not establish nexus for each area they do business in, but rather use a shipping company to have a standard shipping point.
Sales taxes are those that are charged on goods and services that are sold in the U.S. Some states have different tax rates than others, and some states don't tax certain items. Also, some companies, such as non-profit organizations are not subject to sales taxes.
Import trariffs are taxes places on goods or services purchased from a company in one country differing from the country the purchase came from. Even downloaded software can be suject to these taxes.
European Union Value Added Taxes
Unlike U.S. income taxes or sales taxes, the Value Added Taxes used in Europe are added at each step of the production of an item. This can become a difficulty when a company selling from one country to a country located in Europe since they are now required to register with the European Union authorities and perform the same tax actions as those businesses who are based in Europe.