Question: I sell merchandise on eBay and Amazon for side income. I know users of eBay and PayPal can collect sales tax, but it seems very few sellers do. And there doesn't appear to be a way to collect sales tax when I sell on Amazon Marketplace. Should I worry about this?

ANSWER: If you live in a state where sales tax is charged on retail purchases, as the seller you are responsible for paying sales tax to your state's tax department for your online sales. However, you pay sales tax only on transactions with buyers in the state where you reside -- you don't pay tax for items shipped outside your state.

To pay the tax, youll need to open an account with your state's Tax Department. As part of this process, you'll receive a "resale license." In some states this is called a "resale number" or "sales tax certificate." So this will add to your bookeeping chores, but there are benefits. For example, in obtaining a resale license, your state is recognizing you as a legitimate business, and you will *not* have to pay state sales tax on the merchandise and other supplies you purchase to run your online business.

Also, a resale license will enable you to more easily open accounts with wholesalers -- if should you ever decide to expand your business and go that route. Nowadays, most wholesalers require you to provide proof of a resale license before you can open an account with them.

Again, you dont collect state sales tax on books you ship to people with addresses outside your state. This is because Internet sales (as well as fax, telephone, and mail-order sales) aren't subject to sales tax unless you have a physical presence in that other state -- meaning an office or warehouse.

In some states, shipping and handling fees are not subject to sales tax, but in some they are - you will need to investigate the issue for your home state.

Some state governments have been trying to start a new system to collect sales tax on all online sales. Under this scenario, known as the Streamlined Sales Tax Project (SSTP), you would have to pay sales tax on books you shipped to customers outside your state. But it will be years before anything like this is enacted, since it's being fought vigorously be the mail order industry.