Sales tax and the new Wayfair decision

South Dakota and the new Wayfair decision uses a 200 transaction test. I assume that means 200 transactions within the state. Remember, all the other states are falling into line with this decision, like Louisiana and Wisconsin so far with more to come. Wouldn’t surprise me that it would be 200 transactions total and not just within a particular state as the states get greedy real quick like. Or, they will chip away at the 200 transactions so that everyone has to report. Also, anyone seen any user friendly software yet that is idiot proof so we can set our clients loose on them to do their own sales tax returns ( we don’t want to do them )

This could be a goldmine for Amazon. They probably have the resources to develop and administer a multi-state software driven platform for this. They probably already have the state by state sales tax breakdowns and could get this running by the first of 2019. As most here know, many states have a state sales tax, and then additional sales taxes at the county and/or city level. Further complicating matters is that the 5 digit ZIP Codes could cover multiple total sales tax rates. The 9 digit ZIP Codes for purchasers would likely be needed. In Ohio, and I assume in many other states, "casual sales" (think garage sales) are exempt from sales tax. I think at least some of the people selling on eBay fall into that category.

Further complicating matters is that the 5 digit ZIP Codes could cover multiple total sales tax rates. The 9 digit ZIP Codes for purchasers would likely be needed.

I don't understand why many of the comments I've read on this topic assume that ZIP codes are the best or only data element for determining sales tax rates. Street addresses are highly standardized these days, just think of the Zillow or Google maps or credit reporting bureau databases. And the post office vending machine knows all the street addresses when you mail a Priority package, just from a few initial characters.

So, I'd say it's safe to assume that a database that matches every shipping address to its correct tax rate either already exists, or could be created. Not saying it's free, however.

New client will be selling thru Amazon, so I told him “great ...Amazon will do the sales tax”. He said , no, not for this type of Amazon fulfillment.

Street addresses are highly standardized these days, just think of the Zillow or Google maps or credit reporting bureau databases. And the post office vending machine knows all the street addresses when you mail a Priority package, just from a few initial characters.. Probably for the most part, but:
The post office that serves me straddles 2 counties.
The township I am in is served by 2 different post offices.
My house number is different in the USPS records from what it is in my county property records. Not even close.
My street has even and odd township numbers on the same side of the street, but the USPS numbers follow the normal pattern.
Some of the residents on my street use the township number as their address, others use the USPS number.
My street name is spelled differently in the USPS records from what it is in my county property records.
As a result of some or all of the above, I have received jury duty notices from the county I do not live in, and many phone calls from delivery services and/or vendors who tell me my address does not exist.
Yet somehow, my real estate tax bill always comes on time.

Street addresses are highly standardized these days, just think of the Zillow or Google maps or credit reporting bureau databases. And the post office vending machine knows all the street addresses when you mail a Priority package, just from a few initial characters.. Probably for the most part, but:
The post office that serves me straddles 2 counties.
The township I am in is served by 2 different post offices.
My house number is different in the USPS records from what it is in my county property records. Not even close.
My street has even and odd township numbers on the same side of the street, but the USPS numbers follow the normal pattern.
Some of the residents on my street use the township number as their address, others use the USPS number.
My street names is spelled differently in the USPS records from what it is in my county property records.
As a result of some or all of the above, I have received jury duty notices from the county I do not live in

Does your township have its own sales tax rates, separate from the county? From the city? I'm not convinced jury duty notices have any bearing whatsoever. And maybe not even townships.

How does an in-state seller currently determine what to charge you? For example, suppose someone else in Pennsylvania, not near you, contracted with you via phone to sell you some household items, how would they determine the sales tax to collect from you?

And what about Zillow/Google/Equifax/Experian/TransUnion -- do they all have your address standardized?

Probably for the most part, but:

OK, even I'm not going to claim that every single one of many millions of shipping addresses is in a reliable database. If you live in a "off the beaten path" area by design, your address might be inconsistent across various databases. I know people in that situation.

Some of the residents on my street use the township number as their address

Infidels!

"How does an in-state seller currently determine what to charge you? For example, suppose someone else in Pennsylvania, not near you, contracted with you via phone to sell you some household items, how would they determine the sales tax to collect from you?"

I suspect that for most intrastate sales the seller is just using the rate for the seller's location. To some extent it probably evens out. I am not a big e-commerce consumer so don't know for sure. Certainly if you physically purchase an item in a local that has a 7% sales tax, and you live in a local with a 7.5% sales tax, I don;t think the Ohio law requires you to self report that 0.5% difference. Likewise if you purchase something at a physical location in a state with a lower rate, I don't think any states require you to report the difference. I happened to buy a pair of shoes while traveling through PA a couple years ago. Surprise - PA does not tax clothing.

A long held principle regarding the sales tax rate to be charged is to identify where title of the goods or service is physically passed .

In your example if you physically purchase a taxable retail item as well as pickup the item in a 7% rate location then the sales tax rate is 7%. Change the transaction a little and lets say you order the item in a 7% location but have it shipped via UPS or Fedex to Columbus ,Ohio which has a 7.5 % rate . The 7.5 % rate would apply because title to the goods passed in Columbus ,Ohio.

I used to work in the IT department of a company that owned three major divisions, some brick and mortar and the bulk, what we used to call mail order. The division with stores all over the US, used a sales tax software on the common order processing system that collected tax based on expanded zip code thru the entire US. The other two divisions were mostly mail order with outlet stores in a couple of states. They collected state level sales tax in those states.

If they can keep the sales tax requirement to state level, then it is doable. The state can pass out the taxes collected to the local districts. Internet retailers have shut down local businesses causing a loss of jobs and sales tax revenue.

Nope. You still have different definitions, Cathy. In some states, services are taxable. New Mex has a Gross Receipts Tax that is used on services. I think..maybe Wash. State does something like that? So there's too much to know? A. What is taxable? B. Where? Where was it delivered/sold/etc.? C. What's the rate for that particular spot whatever the answer to B. is? D. Will this then subject us to registering to do biz in that jurisdiction? E. Will that, if yes, then subject us to annual biz filings as well?

This is so much bigger than some here want to believe. And it affects every one of us in business, unless you and all your clients only conduct all their business at the country diner over breakfast.

In your example if you physically purchase a taxable retail item as well as pickup the item in a 7% rate location then the sales tax rate is 7%. Change the transaction a little and lets say you order the item in a 7% location but have it shipped via UPS or Fedex to Columbus ,Ohio which has a 7.5 % rate . The 7.5 % rate would apply because title to the goods passed in Columbus ,Ohio.. But you live in an 8% location, where you carry the item to the same day you pick it up in the 7.5% location where title passed, so of course you include it in your use tax return.

Nope. You still have different definitions, Cathy. In some states, services are taxable. New Mex has a Gross Receipts Tax that is used on services. I think..maybe Wash. State does something like that? So there's too much to know? A. What is taxable? B. Where? Where was it delivered/sold/etc.? C. What's the rate for that particular spot whatever the answer to B. is? D. Will this then subject us to registering to do biz in that jurisdiction? E. Will that, if yes, then subject us to annual biz filings as well?

This is so much bigger than some here want to believe. And it affects every one of us in business, unless you and all your clients only conduct all their business at the country diner over breakfast.

From a complexity standpoint, JR has touched on an important dynamic. For Sales Taxes, nexus and the requirement to collect/remit/report is one thing. However, does that nexus give rise to nexus for other taxes? Income Taxes? Gross Receipts taxes? Franchise Taxes? Payroll taxes? Privilege for doing business taxes? Business licenses/registration?
All these various items have different rules in each state and, sometimes, specific other localities. Unless there is some coordinated simplification effort by the states (attempts have been going on for more than 15yrs) or something established on a federal level (incredibly unlikely), there is going to continue to be a tax gap here.

This is so much bigger than some here want to believe.

No, not really.

Purely by coincidence (I wasn't looking for it), I found a white paper (link below) that backs up what I said previously about not relying on ZIP codes. And in addition, the company providing the paper seems to have an automated solution. Like I said, it won't be free, but it's certainly possible using existing data and technology.

After well over two decades of being heavily subsidized by brick & mortar merchants and their customers who have to collect and pay legally owed sales tax, it's way past time for internet sellers to start picking up the slack. No one should feel the least bit sorry for them for stiffing the rest of us for over twenty years.

https://www.avalara.com/us/en/learn/whi ... e-job.html

"Avalara’s automated sales tax calculation service uses proprietary geolocation technology to validate an address and match it to our nationwide database of tax regions. Avalara’s tax data is researched and maintained by our compliance team, so the rates and boundaries are always up-to-date. In addition, our solutions easily manage complex tax issues such as nexus, exemptions, product taxability, sourcing rules, split rates, sales tax holidays, tax caps/thresholds and more."

Sales tax is what Avalara does. They went public on June 15.

ROTFLMAO!! Yeah, there's an automated solution, IF you're automated in your billing AND able/willing to shell out some fairly serious money for it. Wow. And just how many of your clients are fully automated in their billing? I would wildly guess far less than half of mine. And me, neither.

Then, what about ALL THE OTHER ISSUES YOU IGNORE!!!??? I don't think any of us object to fairness...but we're a nation of states with different rules, regs, rates....and someone is trying to unify the un-unifiable. There's a lot of work to done before we can even get to the point of doing what is asked. It's not just adding a piece of software, i.e. pushing a button and magic happens.

able/willing to shell out some fairly serious money for it.

Yes, the free ride at the expense of taxpayers who actually pay tax is over. Maybe the internet as a sales channel isn't as low cost as they've been pretending. The big guys buy the whole national package; the little guys might end up with a Pay Per Sale fee. Not really different from the merchant fees they already pay to banks.

I don't understand what you mean by "automated billing". I manually determine what is on the final customer invoice, but once I do that, everything from that point onward is handled online -- invoice delivery, e-payment link for customer, and deposit into my checking account. This is Quickbooks for Dummies. It also works that way with online sales sites, which I have used for hobby selling purposes, it's all online and automated once the price is locked in.

Then, what about ALL THE OTHER ISSUES YOU IGNORE!!!???[,,,].and someone is trying to unify the un-unifiable.

As I already pointed out, "[Avalara's] solutions easily manage complex tax issues such as nexus, exemptions, product taxability, sourcing rules, split rates, sales tax holidays, tax caps/thresholds and more.""

Yes, the free ride at the expense of taxpayers who actually pay tax is over. [/i]

There has never actually been a free ride. There has only been noncompliance by individuals. The prior rules properly allowed businesses to operate without this administrative burden. Despite what you seem to believe, this is an administrative burden and a costly one in time and dollars.
The taxpayer not previously paying the tax has always been the consumer. This shift in law again co-opts business to collect tax on behalf of the government. I understand the practicality of it, but it is more than a simple "download this program, collect the correct rate, remit it at the end of a reporting period to the proper jurisdiction". Much more than that.

There has never actually been a free ride. There has only been noncompliance by individuals.

100% this.

As I already pointed out, "[Avalara's] solutions easily manage complex tax issues such as nexus, exemptions, product taxability, sourcing rules, split rates, sales tax holidays, tax caps/thresholds and more.""

Well, geez, if a marketing pamphlet says it's simple, it absolutely must be! How foolish we all are!

Well, geez, if a marketing pamphlet says it's simple, it absolutely must be! How foolish we all are!

Well geez, if an unhappy commentator on a discussion forum says it's impossible, it absolutely must be!