If you sell something repeatedly as opposed to selling your old ipod as a one-off on ebay, then you are required to collect sales tax. In some states, I believe the home rent you pay also has a sales tax. So, my question is, if someone displays ads on their websites, like AdSense or others, in a way, they are renting out their online property for others. So, are the buyers of ads required to pay a sales tax? Are you required to collect the sales tax and pay it to the govt? This gets a bit more complicated when there are middlemen like Google for AdSense or AdBrite or other companies that actually collect the CPC or CPM and give you a commission. For physical goods, the tax is typically based on the ship-to address and I think there is also the bill-to address involved. However, with online advertising, as there is no physical goods involved, there is no ship-to address. Unless, one wants to consider the ip address of the user who visited the website and figure out the address using the ip-geo mapping. This probably makes a little sense for CPC ads as there is an explicit action by the end user of clicking the ad. But what about the interstitials and banner ads where the ads are forced upon the user irrespective of whether or not the user is interested or watching the ads. What if the user has installed ad blockers and so even though the network assumes an impression, the ad is not really being viewed by the end user. Or should the tax be decided based on the website location? But then, most people live in one state and their hosting solution in another state. Which one would be used for the tax?
With online advertising increasing every year, I am sure there would be sales tax discussions about it in the future. Based on the online research I did, I don’t seem to find any information. So, just putting down my thoughts. However, I hope that this won’t happen because, as is the CPC rates are decreasing each year and small players are making only a few dollars a month. If some of that is going to be eaten up by a sales tax, then that would make it difficult for many bloggers and small websites.
