You probably already heard, the United States Supreme Court ruled on June 21, 2018 in South Dakota v. Wayfair, Inc. that physical presence is no longer necessary within a state to establish nexus. So what does this mean to your business? What should you do right now?
When you boil the Courts ruling down it means that when you ship goods or provide services into a state, you have established a relationship with the state that will (in most cases) require you to collect sales tax on your goods and services and remit those taxes to the state periodically.
What you need to know about nexus, sales tax and compliance:
- For starters, it’s complicated! Not somewhat complicated, or could be complicated – it’s extremely complicated in almost all states. Despite many accounts that there is a "streamlined" state guideline or process, which albeit is somewhat true, this viewpoint, we believe is misguided at best.
- Second, the Court did imply that de minims rules should be present in state rules – meaning if you ship one $10 good into the state, this isn’t enough to require you to collect and remit sales tax. Therefore, your business transactions for each state will need to be examined based on the minimum requirements of each state and performed periodically dependent upon the states guidance.
- Thirdly, there are over 12,000 taxing jurisdictions throughout the United States. Different tax rates apply based on 5 digit zip code, 9 digit zip code, city incorporation and/or county. Furthermore, the taxability of a good may vary not just from state to state, but in some states by county or city as well.
- Lastly, in order to comply and reduce your liability – you need to rely on tax calculation software. As is always the case with software, it’s not a "one size fits all" or "plug and play" exercise. One solution may be perfect for a small seller of goods, but wouldn’t work for a larger seller of the same goods.
What you should do right now:
- Consult a transaction tax specialist. There are transaction tax specialists across the United States, who have dedicated their careers to providing not just sales and use tax advice, but a balanced approach to running a small or medium sized business while being tax compliant. These professionals can help you:
- Determine which states you should be collecting sales tax in. This is typically referred to as a "nexus study." This study provides your business with detailed information on nexus creating activities in each state.
- Review and assess if you are correctly taxing products & services that your business sells. Again, the rules are complex and vary, sometimes dramatically, by state.
- Help you determine the right tax calculation & compliance software for your needs.
In the wake of the ruling, Tax Technology Group, Inc. (learn about us here) is offering a free consultation to sellers seeking sales and use tax assistance. If you’d like to schedule a consultation please submit a request.