Is your company involved with e-commerce? If so, you’ll want to know about a recent Supreme Court decision regarding when a business involved in e-commerce is to collect sales tax. Below is an excerpt from an article written by our friends at Copeland Buhl (copelandbuhl.com) titled “Wayfair’s Impact on Small Business” that gives insight into the ruling.
There is a buzz around Sales Tax due to last summer’s Wayfair Supreme Court decision. This decision changed a long-standing rule requiring a physical presence in a state before a business had to collect sales tax. Physical presence in no longer a requirement. States are taking advantage of this change and requiring more businesses to collect sales tax. Generally, these requirements are at least $100,000 of sales or 200 transactions in a year. Unfortunately, failure to comply could cost your business uncollected tax, penalties and interest; not to mention an audit.
You are mostly likely to be impacted if you sell from your own website. While the new rules under the Wayfair decision do not apply to transactions prior to October 1, 2018; once you register in state, they have your name and number. They may start looking at your past activities to determine if you should have collected sales tax under the old rules.
Here are some things you can do to turn down the noise:
- Rank your potential problems by analyzing your sales by state for the prior year. Are you over the thresholds of $100,000 in sales or 200 transactions? How much of these sales are taxable sales?
- Get the statute running by filing a Sales and Use Tax return in every state you have an employee, inventory or other property.
- Be ready when the Auditor comes knocking, have your exemption certificates ready and archived by state.
- Plan for automation by standardizing the process for collecting and reporting sales tax. Review your current process to minimize the judgement calls.
- Review your past activities in each state under the old rules. Did you go to a tradeshow? Did you visit a customer to fix a product or provide training? You may want to limit your exposure by filing Voluntary Disclosure Agreements.
Corporate and business law is one of Sanford, Pierson, Thone & Strean, PLC’s primary practice areas. Contact us at ContactUs@ssmnlaw.com or (952)404-2100 to learn how our experience and advice can provide a strong legal foundation for your company.