Sales tax is a big source of revenue for states. It is in each state’s best interest to be vigilant about getting paid. Up until 2018, there were some distinct grey areas when it came to online or remote retailers paying state sales taxes. Previously, merchants weren’t responsible for collecting and remitting sales tax if they did not have a physical presence in the state in question.
The Supreme Court decision South Dakota v. Wayfair has changed the status quo.
South Dakota law now requires online retailers to collect and remit sales tax if the retailer sells more than $100,000 in the state or completes at least 200 transactions with South Dakota residents.
Other states are enacting their own sales tax laws.
On Oct. 1 of 2018 the following states enacted their own changes to their respective laws:
- Alabama
- Illinois
- Indiana
- Kentucky
- Massachusetts
- Michigan
- Minnesota
- North Dakota
- Washington
- Wisconsin
Among the 52 different states and other jurisdictions, there will be different tax rates. The tax rates will depend on what is being sold (products AND services) and possibly the jurisdiction where consumers reside. So one customer who lives across the street from another could be imposed a different sales tax rate as a result of unique taxing jurisdictions.
The consequences of not complying with the new laws
According to the Small Business Administration (SBA), “as a small business owner, you are required to assess sales tax, collect it and pass it on to the appropriate authorities within the prescribed time.”
If you aren’t compliant with the different sales tax laws, you run the risk of:
- Assessment
- Audit
- Lien
- Referral to a collection agency
- Or referral to the Office of the Attorney General of that state
This also applies to Canadian retailers doing business in the United States.
What about B2B merchants?
Experts are saying that the implications for B2B sellers and their customers are far from clear. Regardless of whether or not you have a physical presence in that state, you will need to determine your nexus and your required level of compliance.
To check your nexus: you can start by using this dynamic tool, created by Avalara, a leading cloud-based tax compliance solution.
It will be important to work with your legal professionals and CPAs to explore how the new laws apply to you and any exemption certificate requirements.
Our recommendation: Avalara Tax Solutions
Insite, Magento and Shopify Plus all integrate with Avalara.
Avalara makes tax compliance easy, helping you avoid mistakes about rate changes or filing deadlines.
Overall: know that each state’s sales tax laws are bound to change. Planning to be and staying compliant is an ongoing responsibility. Stay informed, consult your financial experts and reach out to the professionals at Avalara.
For a much deeper dive into eCommerce and Sales Tax Legislation, read more from the experts at Avalara.
Absolunet is a partner of Avalara.
