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.

 

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.

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