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  1. #1
    Join Date
    May 2012

    Default Are E-Commerce Platforms Taxable Products or Tax-Exempt Servicess

    My question involves business law in the state of: Michigan.

    I'd like to start an ecommerce site, providing horticultural nurseries (within Michigan, but eventually out-state as well) with their own branded estores and general marketplace.

    I've found an ecommerce platform which permits me, as the admin, three ways to charge sellers, for use of the site:

    • Collect a sales commission, just as a salesmen would, for bringing together buyers and sellers

    • Charge sellers a flat fee for listing on the site and buyers and sellers would deal directly--however, on or through my site. I, as the admin, would not profit from particular sales.

    • I, as the admin, would also have an option to charge listing fees, not less than a dollar per item.

    It seems to me that I would be providing a sales-tax exempt SERVICE, not selling a product.

    Will the Michigan tax man disagree?

    Or am I creating a tax and accounting nightmare, where I might need to pay sales tax in every state to which sellers ship!

    Should I incorporate or LLC?

  2. #2
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Are E-Commerce Platforms Taxable Products or Tax-Exempt Servicess

    So all you would be doing is providing the platform?

  3. #3
    Join Date
    May 2012

    Default Re: Are E-Commerce Platforms Taxable Products or Tax-Exempt Servicess

    Yes, I would provide only the platform. I would not grow, warehouse or sell any plant material of my own. I would also offer optional services, such as building sellers' stores, processing their graphics, uploading product catalogs. I would require sellers to provide me state registration numbers and verify from public records that a) they are state licensed growers and b) that they are retailers with sales tax licenses. The software I hope to use collects sales tax from buyers and passes it through to sellers.

    As the administrator of the site, the software gives me a window on all transactions and and some discretionary powers such as handling RMAs. I'm not quite sure how to use these features, but it seems to me that it all falls within the domain of a service to businesses, not a "tangible product to end consumers".

    Wholesalers and private individuals would not be allowed to sell on my site. As I see it, I'm providing a service, not a product--or if I'm selling a product, it's advertising to retailers. My account told me that wouldn't be subject to sales tax. I'm also considering adding a banner ad server to the program. This would design and sell banner ads to growers and offer then on a banner ad auction site.

    Frankly, I don't think I need a nursery license for this business either. I'm waiting to here from the D. of Ag. about that. What licenses would I need?

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