When New York first passed its law defining what constitutes a “vendor” subject to collecting sales tax in the 1980’s, the idea of online shopping sounded like science fiction. In retrospect, NY may have effectively enacted the first “economic nexus” law when they drafted their definition of “vendor” to include a person who regularly or […]
How to Prepare for New Remote Commerce Taxation Requirements
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:
- 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.
- 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.
- 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.
With recent enforcement measures, the IRS has offered definitive proof that the Affordable Care Act (ACA) is still alive and that the agency plans to strictly enforce ACA reporting. Last spring, the agency issued Letter 226J to Applicable Large Employers (ALEs) that failed to cover 95 percent of employees. ALEs are companies with 50 or […]
UPDATE (Jan. 8): Reporting season is moving forward according to plan. The IRS has announced that it will process tax returns on schedule and without delays. While the agency will clarify its contingency plan in the coming days, organizations should proceed as planned with 1099 reporting and other seasonal filings. The IRS will recall a […]
The South Dakota v. Wayfair decision last June has created a lot of angst for indirect tax professionals and the businesses they work so hard to protect from the burdens of sales and use tax filing. Six months later as we begin the new year, that angst has not gotten any lighter. Any federal legislative […]
2018 was a volatile year in indirect tax compliance for tax, finance and IT professionals worldwide. With an increase in globalization and tax gaps surpassing tens of billions in some countries, it’s not surprising that one of the biggest challenges governments are addressing is revenue collection. Like enterprises, governments are creating new, technology-driven processes to […]