Just because you are a small seller, don't think that you are out of the woods when it comes to 'economic nexus' in relationship to your sales across the internet in other states. Especially if you are selling via a eCommerce marketplace like Amazon, eBay or Etsy. It could turn out to be the worst 'trick or treat' Halloween if some states get their way with their interpretation of sales tax liabilities. A 'treat for them' and a big 'trick for you,' the small seller. But before we get too far into this haunting subject, I must tell you that...
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Sales Tax Tuesday (2018) is a joint venture between Insightful Accountant and Avalara, the tax people. While we set-out to cover each state's sales and use tax requirements during 2018, as we did back in 2015, we also came to the conclusion that we had an obligation to inform our readers of breaking news and key developments related to sales and use taxes as a whole. One of the biggest news makers during this year (thus far) has been this past June's Supreme Court decision regarding 'economic nexus.' As such, we have had to take more than a few breaks from our 'RV trip around the country paying sales tax as we went from state-to-state' so we could keep you up-to-date.
The number of states having implemented, or soon to implement, economic nexus as a result of this past summer's South Dakota v. Wayfair decision by the U.S. Supreme Court has mushroomed, and like mushrooms they are certainly prone to spreading. In fact, I am wondering if some of those mushrooms are going to make their way into the tax witches (aka: tax collectors) pot to brew up some horrible haunts for uninformed merchants.
Most states have implemented 'trigger levels' of 200 or more transactions by an out-of-state seller in their state, or sales within their state by an out-of-state seller of $100,000 or more, in any one year, to require a seller to collect and remit tax. While you might think this means that small 'mom-n-pop' type businesses selling 'here and there' across the internet are likely going to be under these thresholds (and not be responsible for taxes), when it comes to most states...you can't be certain.
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The reason the potential sales tax liability is unclear is that many states don't look at an individual seller in the same way if they are doing business via an eCommerce marketplace in contrast to their own retail establishment or web-store. If they are doing business 'on their own,' they may be exempt from the requirements to register, collect and remit sales taxes imposed by a state's economic nexus provisions; however, if they are doing business through the auspices of Amazon, eBay, Etsy or similar eCommerce marketplaces, then state sales tax administration authorities are making efforts at enforcing 'all sales' via the marketplace to come under their economic nexus provisions, not just those sales arising out of the marketplace itself.
Multiple states including Alabama, Arizona, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Virginia and Washington have adopted requirements related to marketplace facilitators, referrers and sellers in an attempt to insure that the marketplace assume responsibility for collection and remittance of sales tax on all sales, not just their own.
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The tax collectors in these states could even be preparing to 'trick or treat' at your place of business to insure that you are compliant. Indeed, these ghosts and goblins maybe lurking in the dark just waiting for you to make a sales tax 'nexus' mistake.
The attempts to include 'all sales' by virtue of the 'channel' through which the sale occurs is further compounding the issue of economic nexus compliance on it's own, and making it difficult for retailers of any size to know and fully understand their responsibility. Just another reason why you, or your clients may need the assistance of Avalara, the tax people, when it comes to properly determining sales and use tax compliance wherever you sell.
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More and more it is starting to look like sellers need to be fully compliant with all 45 of the states that have sales tax requirements (out of the 50) "lest ye fall victim to the dreaded 'economic nexus' plague."
That's why you should consider an automated sales tax solution like AvaTax that can keep you compliant in terms of your responsibilities including tax calculation, exemption certificate management, returns process and 1099 filing and reporting. With Avalara, the head of your tax compliance team you won't be sacrificing productivity of your business or personnel, yet you will be assured that your tax is always right, streamlined and seamless no matter where you are located, and where or how you are doing business.
This article is a summary of this topic, for greater detail, be sure to check out Gail Cole's much more detailed post in the Avalara Sales Tax blog.