How to Prepare for New Remote Commerce Taxation Requirements

Charles Maniace
July 24, 2018

In a recent South Dakota v Wayfair Q&A webcast, Sovos experts answered your most burning questions regarding which states have new regulations, statutes or pending changes relating to remote commerce, economic nexus sales tax obligations and how you should prepare.

What should sellers be doing to prepare for this new era of sales tax where states have enacted or are about to enact new economic nexus standards?

It’s only been a month since the South Dakota v. Wayfair decision, but state governments have done an awful lot to set the stage to begin taxing remote commerce. Depending on existing law, the required next step for a given state will vary:

  1. Some states will have to pass statutes – which can be an involved and political process, although a motivated state legislature can sometimes pass a law pretty quickly.
  2. Others may be able to do it through regulation, meaning their existing statutory law doesn’t necessarily restrict taxing remote commerce. Regulations, which are passed by administrative agencies (e.g. the DOR) have some formal process requirements, but nonetheless can be issued fairly quickly.
  3. Still, other states already have remote commerce laws on the books and were simply waiting for Wayfair to be decided to enforce them. These states could begin taxing remote commerce based on a simple announcement published on the DOR website.

Whether it be by statute, regulation, or announcement, states have moved remarkably quickly to begin taxing remote commerce. Right now, July 1 and October 1 effective dates are the most prevalent. Sellers need to prepare now by not just staying on top of these changes – which you can do by subscribing to our regulatory feed weekly emails here – but also perform some preliminary analysis of where your most significant exposure lies.

In the webinar, we discussed that a good preliminary step involves reviewing those states where your organization is currently not registered for sales tax but where you have significant transactional volumes. It appears that states are using the South Dakota standard of $100,000 in sales and 200 separate transactions as a guide, so knowing where your company may meet these numbers will be useful. If the last few weeks are indicative of what will happen in the future, it seems likely that almost all sellers will find that they have liability in new states before the year is through.

The rate at which states are issuing guidance is unprecedented. For a quick recap of what we’ve seen in the past few weeks, watch the latest Chuck TV segment below and subscribe to our Youtube channel for updates. For more timely, weekly updates on state regulatory changes, be sure to subscribe to the Regulatory Feed.

 

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Charles Maniace

Charles Maniace is the Director of Regulatory Analysis at Sovos. An attorney by trade, Chuck leads a team of attorneys responsible for all the tax and regulatory content that keeps Sovos clients continually compliant. Over his 14 year career in tax and regulatory automation, he has given talks and presentations on a variety of topics including The Taxation of High Tech Transactions, The Taxation of Remote Commerce, The Regulatory Implications of Brexit, The Rise of E-Audits, Form 1042-S Best Practices and Penalty Abatement Practices for Information Returns. Chuck is a member of the Massachusetts Bar and holds a B.S. in Business Economics from Bentley College, a J.D. from Boston University School of Law, and an LL.M in Taxation from Boston University School of Law.
Share This Post

Tax Information Reporting United States
2019-03-22
How to Respond to the Growing Challenges of 1099-R Reporting

The demographics don’t lie: Reporting for form 1099-R is only going to grow more difficult as baby boomers retire. The form used to report distributions from IRA, pensions, annuities and other similar retirement accounts is poised to explode in volume. As such, financial institutions (FIs) and insurance companies can’t afford to mishandle 1099-R reporting. The […]

E-Invoicing Compliance EMEA
2019-03-21
Portugal Issues New E-Invoicing Rules: A Flavour of Clearance but Not Quite There

On 15 February 2019, Portugal published Decree-Law 28/2019 regarding the processing, archiving and dematerialization of invoices and other tax related documents including: The mandatory use of certified invoicing software General requirements for paper and electronic invoices Dematerialization of tax documentation Archiving of tax documentation (including ledgers, etc) Adjacent tax rules and obligations The decree aims […]

EMEA LATAM VAT & Fiscal Reporting
2019-03-18
Are We in the Golden Age of VAT Recovery?

The value-added tax (“VAT”) was described in the EU as a “”money machine” over 20 years ago. Yet according to a 2015 study by the European Commission by the Centre for Social and Economic Research (CASE), the “VAT gap” was approximately 168 billion EUR. This represents 15 percent of the theoretical VAT that would be […]

Tax Information Reporting United States
2019-03-15
As Legal Sports Gambling Grows, So Does Growth in W-2G Reporting

With the NCAA basketball tournament approaching, the US is gearing up for its biggest gambling weeks of the year. And while most “March Madness” pools might technically be illegal, legitimate sports betting is sweeping the US following last year’s landmark Supreme Court decision allowing states to legalize sports gambling in casinos.   As legal sports […]

E-Invoicing Compliance EMEA Italy
2019-03-14
Italy E-invoicing: Esterometro Reporting Requirements for Cross-border Transactions Updated

What is Esterometro? The Italian government’s e-invoicing mandate became effective on 1 January 2019.  While cross-border invoices are exempt, all domestic B2B and B2C invoices must be cleared through the SDI platform. This means that the Italian government and tax authority now have real-time access to the data of all B2B and B2C VAT transactions […]