It’s been quite a while since I’ve done the last mailbag, but things have been pretty hectic. For one thing, our online store store has been experiencing some growing pains. Currently, we are getting more business than we can handle which is causing us some amount of mental strain and fatigue.

We are now debating how much additional help we need to hire without blowing the budget. At the same time, my two year old daughter has become a handful and my son is just starting to become mobile. In any case, don’t want to bore you too long with mundane family details. Onto the Q & A.

I live in Winnipeg, Manitoba Canada and am looking at starting an online business selling virtual strategic planning tools to Canada and the USA. My question is about paying sales tax on online sales. I have been doing research and apparently in February of 2010, many of the US states started collecting sales tax on online sales. There are varying rules, depending on the state. But what I am wondering, is who do I contact in each state to find this out, and how do you manage the diversity of sales taxes charged by individual states? Secondly or was that thirdly, hmmmm, well is there yet a federal sales tax in the USA on online sales, or is that still coming down the pike?


Tyler of Webbiz Finance responded
While most states now require the vendor to collect sales tax from customers for internet sales you are only required to do so if you have a “nexus,” a physical presence, in that state. So if Steve sells something to me in Indiana and he doesn’t have any type of shop or presence in Indiana then he can not be required to collect Indiana sales tax.
Aside from that, if your product is delivered entirely over the internet (no physical item) most states don’t collect sales tax on that. If you want more detail I did a post on internet sales tax for my blog; feel free to come by and take a look.

Here was my 2 cents
Everything Tyler says is true. The only thing that you have to be careful about is if you run an affiliate program. If you are giving a cut of your revenue to people who refer customers to your website, you may have to have customers who reside where your affiliates live pay sales tax.

In other words, let’s say Tyler is an affiliate for my store. If a customer buys something from Tyler’s state, I might have to pay sales tax for that purchase. Not all states do this right now but I know Amazon has rescinded their affiliate program in several states already because of this. In any case if you don’t have an affiliate program, you are fine.

Hi Steve. I understand the importance of having content within an online store. Just curious – do you use Google Adwords for your content pages also?

Answer:
We don’t use Adwords for our content pages because the content pages attract traffic organically via search. The basic strategy we employ is to funnel free traffic to our content pages and then divert these customers to our product pages. If Adwords is required to get traffic to content, then the content isn’t good enough.

Hey there! I just signed up for your newsletter and am loving it so far.:)

My husband and I have been back and forth between starting a brick store, or an online. Drop shipping or wholesale shipping?So many choices!!

I have been researching online for over a year now and have finally decided to start (well it didnt take me that long to decide, but I had our daughter who had health issues and passed away at 3 1/2 months of age).

I do have a few questions for you… first off, why do you not suggest a free host such as angelfire and etc…. also I noticed you said you lost money,basically,using Paypal. Why is that? They are secure and do money back guarantee with customers. I know I purchase alot online and that is only way I rather check out is Paypal.

Also, I can not really fly overseas to go to conventions and etc.,but who is a trustworthy online over seas company to use wholesale who does orders smaller than say $1000.00? I found liquidations.com here in the states…do you know anything about them?Are they trustworthy?

Just wondered your input on these things.Sorry to bombard you with a million questions..but you do great work and I would love to see your site!!!!!!Thanks


Answer:
Thanks for the comment and introducing yourself. In answer to your
question, I would never use a free host to host a real business
because of several reasons. One, free hosts are not reliable and do
not guarantee their uptime. Two, there are usually bandwidth limits
involved and limitations with what you can do with your account. For example, Angelfire only allows 15MB storage with their free account which isn’t nearly enough. Three, regular shared hosting is so cheap at around 5 or 6 bucks a month so why bother? Take your business seriously and pay the money.

When I talk about Paypal in my ebook, I’m referring to Paypal standard
which is the free service that Paypal offers. With Paypal standard,
your customer is forced to leave your site in order to complete a
transaction on the paypal.com website. Having customers leave your site for any reason is bad for your conversion rate. That being said, Paypal offers a paid service called Paypal Website Payments Pro which allows customers to process their payment on your site directly. Paypal Payments Pro is the service that I recommend.

In terms of product sourcing, if you do not want to attend the various
wholesale tradeshows then I would suggest using Worldwide Brands to do your vendor research.

My wife got fired by US Mail! Now we are looking into ecommerce, I am a licensed insurance agent.

I guess product liability isn’t a real issue in as much as errors and omissions would be. So what would be the best route? LLC for some protection up front or C Corp, because once you start earning commission on premiums the sky is really the limit. Your income depends on your time and closure rates.


Answer:
If you ever plan on issuing shares of stock or taking the company
public, then do a C corp. Otherwise an LLC is much easier to handle and you can elect to have it taxed like a corporation if you want. No matter what the business however, I would still consider purchasing product liability insurance. After all, the US is a very litigious country.

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