Sales Tax

I know State sales taxes are not often a topic on this site, but the US Supreme Court today did away with the Quill and Bella Hess physical presence test and upheld South Dakota's sales tax on Wayfair, Inc and other online retailers who have no physical presence in South Dakota.

here is an article on it.

https://taxfoundation.org/supreme-court ... -tax-case/

Wow, thanks for the post.

I know State sales taxes are not often a topic on this site, but the US Supreme Court today did away with the Quill and Bella Hess physical presence test and upheld South Dakota's sales tax on Wayfair, Inc and other online retailers who have no physical presence in South Dakota.

here is an article on it.

https://taxfoundation.org/supreme-court ... -tax-case/

Yeah...this will be HUGE. The administrative burden on small business is almost immeasurable.

S.Dakota, I believe has a small exemption of say $100,000 in sales but not sure if that's SD sales or total sales.

So imagine your clients does $2 million total, $100,000 of sales in NY. They could be required to file and collect in every county in NY all of which use a different tax rate.

And for a computer to match a shipping address to a county sales tax rate will take, what, 0.03 seconds?

And for a computer to match a shipping address to a county sales tax rate will take, what, 0.03 seconds?

This completely ignores the practical aspect of this administrative burden.
Unless you have a shipping system fully integrated into a plugin that ensures the state and local sales tax rate in every locality is properly calculated on the invoice to the customer AND that that information is easily accessed on the back end for reporting purposes, this can be a manual process. Even if just one of those dynamics is manual, it can increase the time it takes to prepare a sales tax return from what could be as little as 15-20min to 4+hrs.
My wife's business, for example, just upgraded their Point of Sale system. The reporting on the back end is much better than their prior system, but it is still seriously lacking for clarity and efficiency.

Small business usually do not have the most integrated and sophisticated IT systems. So it seems the burden will feel harder on the small biz.

That is why it is unfair for the state of SD to just say that it will take .03 seconds to do the county and or state sales tax. And don't think this exemption of $100k won't be chipped away till it is near zero.

And don't think this exemption of $100k won't be chipped away till it is near zero.

The exemption is one of the major contributions to South Dakota's victory in the case.

Potential nightmare without knowing more details than indicated in article. Some of what was mentioned seems reasonable, such as no audit liability if a entity uses a state provided sales tax administration application. Same with standardizing tax rates.

Small businesses do not have the resources at their disposal to implement the technology that is required to properly track all of this if it is to be handled the way my state wants it handled. I used to work for a company that distributes consumer goods at wholesale and retail on a national level. All 50 states. This seems to mean, now, that they and like-type companies need a system to track sales to each county in all 50 states, filing requirements, due dates, tax rates (and they often change in the course of a year), etc.

The burden for properly tracking this in ONE state with many counties is bad enough. Few of the accounting/ERP systems used by smaller companies can track this without significant manual effort. We are not discussing Arizona with 15 counties, which would be doable. South Carolina has 46 counties and it was impossible to track sales tax the way the state required. Ultimately, a risk-based decision was made to collect and remit based on the originating county, which happened to equal the state's standard tax rate.

For those States that participate, you may find this helpful - http://www.streamlinedsalestax.org/inde ... e=alias-11

The burden for properly tracking this in ONE state with many counties is bad enough. Few of the accounting/ERP systems used by smaller companies can track this without significant manual effort.

You also have to consider a state like WA that has well over three hundred taxing districts.

Cornerstone, Arizona may have just 15 counties but every city in the state has a different tax rate and their own taxing scheme. So you have to deal with 15 counties and hundreds of cities. Plus there are cities that are located in two counties and there are other areas that the mailing address is one city but another city is actually the taxing jurisdiction.

I don't care where you live, this is a nightmare. Its not just the 3 seconds it takes to fill out the return. What about the time it takes to get the application to get the sales tax license, fill out the license application, and pay the license fee each and every year because you might have a sale that year in that jurisdiction.

Sounds like it's time to create an action committee for fixing this catastrophic and widespread sales tax conundrum.

First, of course, we will need a name. How 'bout we call it the "Integrated Taxation - State Unified Committee to Kick Sales Tax". "IT SUCKS Tax" or something like that.

Cornerstone, Arizona may have just 15 counties but every city in the state has a different tax rate and their own taxing scheme. So you have to deal with 15 counties and hundreds of cities. Plus there are cities that are located in two counties and there are other areas that the mailing address is one city but another city is actually the taxing jurisdiction.

It's just making a relative point. It is difficult enough to track by county, so as you said now add in local taxes. This just shows the idiocy of lawmakers, and how little business experience, if any, they actually have.

The only way this could possibly work is to set a flat rate for all orders shipped to a particular state, with no consideration of county or town/city. Holding a retail license in 50 states is bad enough, but it certainly beats holding THOUSANDS of retail licenses that are going to be required based on this court ruling.

Am I the only one that sees this also opening the door to additional nexus nightmares?

The only way this could possibly work is to set a flat rate for all orders shipped to a particular state, with no consideration of county or town/city. Holding a retail license in 50 states is bad enough, but it certainly beats holding THOUSANDS of retail licenses that are going to be required based on this court ruling.

That is, incidentally, the way that Illinois does it. They have the nightmare every-city-has-a-different-tax-rate, but if you ship something from out of state it is taxed only at the base 6.25% or 1% rates.

The Supreme Court noted, in their decision, that they would not rule in favor of all interstate sales tax laws more expansive than the now-demolished Quill rules. The $100k/200 transaction safe harbor and the adoption of the streamlined sales tax rules (including not having to have licenses with each locality) were factors in their decision.

What we really need is for sales tax to move to an IFTA-style regime. Never will happen, but it would be nice.

Missingdonut, we need to move towards a value added tax model. It has worked in Europe for something like fifty years. The UK had some daft rules when they introduced it in 1973, but sensible harmonization with the rest of the EEC countries made it easier for small businesses (like my parents - one retail shop and a master electrician) to comply with minimal effort.

Maybe I'm just being pessimistic, but the sales tax requirements could be handle by the heavy weights like Amazon. I don't see how small biz's could comply without spending a lot of time and money for an activity that does not generate any Revenue. Small biz will have to increase prices to be able to comply, which will make them less competitive to corporate biz's like Amazon with very low prices. This makes the small biz's less competitive.

Missingdonut, we need to move towards a value added tax model.

As long as every state and locality can have their own rules on what is taxable at what rate at what location, VAT would not help. I am not opposed to the VAT model but the problem in implementation is our system where there are 50 sets of laws plus thousands of subsets of those laws.

Maybe I'm just being pessimistic, but the sales tax requirements could be handle by the heavy weights like Amazon. I don't see how small biz's could comply without spending a lot of time and money for an activity that does not generate any Revenue. Small biz will have to increase prices to be able to comply, which will make them less competitive to corporate biz's like Amazon with very low prices. This makes the small biz's less competitive.

Unfortunately, part of Amazon's model is to use their affiliates to sell on their site. Amazon is not the retailer (just like eBay is not the retailer of their sellers) so I don't think they could collect the sales tax and handle it. It would be nice if they could, though.

I don't see how small biz's could comply without spending a lot of time and money for an activity that does not generate any Revenue. Small biz will have to increase prices to be able to comply, which will make them less competitive to corporate biz's like Amazon with very low prices. This makes the small biz's less competitive.

How ironic, that you are using the same argument that leads to taxing online sales from out of state in the first place -- namely, how it is an unfair competitive advantage compared to brick and mortar retailers.

It's also astounding to me how everyone seems to assume that every affected business will completely and voluntarily comply. I thought states already have a big problem with ensuring compliance of the physically present sellers.

As for how difficult it will be for the small biz to comply, let's start with discussing why Quickbooks sales tax features will or won't be adequate (I think they will be).

If you think small biz will have problems with collecting and forwarding sales tax consider how difficult it will be for all these little taxing districts to monitor compliance. Will they know if one of their residents bought a $15 tee shirt from smallbiz@nowheresville.yourstate?