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2020 has reached the mid-year mark and Avalara is delivering a live presentation on this year’s sales tax changes. The report takes stock of what’s taken place in the world of sales tax since the year began. This includes emerging trends, unforeseen changes, and the curveball this year threw the world with the COVID-19 pandemic. Join us for a live webinar presented on July 15 at 1 pm by the sales tax experts at Avalara on their 2020 Sales Tax Changes Midyear Update.
The coronavirus (COVID-19) pandemic hamstrung brick-and-mortar commerce with a tremendous shift to digital operations and eCommerce.
All the while, businesses scrambled to deliver on fulfilment obligations to customers, remain solvent, and even retool to meet the demand for specific products.
Governments addressed the issue in a number of ways, with delayed VAT filings or temporarily cut the VAT rate for industries bearing the largest impacts. For example, the United States pushed back to state and federal income tax deadlines. This provides more time for individuals and businesses to file and pay.
If you recall the 2018 United States Supreme Court decision in South Dakota v. Wayfair, Inc., the ruling enabled states to tax businesses that have economic activity but no physical presence in the state. Otherwise known as economic nexus. It was a big deal. It still is. At the time, only a handful of states moved on the new ruling and began charging states without physical presence sales tax.
Fast-forward to the June 2020 sales tax situation and the vast majority of states have signed on to adopt these economic nexus laws. COVID-19 has only heightened awareness among states that remain on the fence and it won’t be long before these convoluted rules apply to all 50 states.
As the last six months have proven, the states are on their own in a number of social and economic areas. As the pandemic continues to send shockwaves through economies of every scale, states are sure they’ll need to supplement their coffers one way or another to remain effective in serving their residents. 2020 sales tax rules for individual states are likely to change to address the need for making up lost revenue.
If you haven’t heard of Zoom or GoTo Meeting, chances are you’ve been living under a rock for the past six months. States are anticipated to raise taxes on these heavily utilized platforms. As a result, digital meeting and entertainment services are likely to see sales tax legislature expanded at their expense.
Marketplace facilitators like Etsy, Amazon, eBay and others, are expected to collect and remit sales tax at an increasing rate. This shouldn’t come as a surprise. Most states already have such laws governing marketplace facilitator sales tax collections on the books. Just four states remain in this situation in the entirety of the US. One is already closely eyeing the implementation of such legislation.
Nothing is guaranteed but death and taxes. Unfortunately, sales tax rules seldom retain the same state for very long. The last six months have seen reductions or eliminations of sales tax rules for feminine hygiene products. There’s even been discussion within some regions on the elimination of sales tax for firearms. Now, groceries are a focal point for communities hardest hit by job loss and economic downturn.
You can read more in Avlara’s comprehensive report, here: 2020 sales tax changes midyear update.
Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.
We’re hosting a special webinar next week with our partners at Avalara. The South Dakota v. Wayfair, Inc. Supreme Court ruling includes the biggest internet sales tax changes since 1992 and the impacts are being felt by businesses all over the United States.
The decision effectively overturned a longstanding physical presence rule (Quill Corp. v. North Dakota) for determining when a state can make remote sellers collect sales tax. These changes are currently in effect and some businesses are having to pay sales tax as far back as Q1 2018.
What: George Padilha of Avalara discusses the implications for businesses across the US under these new rules and how to determine where your business holds economic nexus.
Don’t miss this essential webinar for any business conducting sales across state lines.
When: Oct 30, 2018, 2:30 PM Eastern Time (US and Canada)
After registering, you will receive a confirmation email containing information about joining the webinar.
Experts in all things revolving around tax compliance, Avalara makes tax compliance easy and efficiently, enabling you to do what you do best without constantly worrying about rate changes or filing deadlines.
Encompass Solutions, Inc. is an ERP consulting firm, NetSuite Solution Provider and Epicor Platinum Partner that offers professional services in business consulting, project management, and software implementation. Whether undertaking full-scale implementation, integration, and renovation of existing systems or addressing the emerging challenges in corporate and operational growth, Encompass provides a specialized approach to every client’s needs. As experts in identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.
The South Dakota v. Wayfair, Inc. Supreme Court ruling has a significant impact on businesses all over the United States. The decision effectively overturned a longstanding physical presence rule (Quill Corp. v. North Dakota) for determining when a state can make remote sellers collect sales tax.
In short, sales tax makes up more than 40% of South Dakota’s revenue. The Supreme Court judged it to be unfair that e-commerce and remote sales should be able to avoid sales tax that can generate as much as $14bn for states annually.
The aim of the ruling is to level the playing field between non-collecting e-commerce and remote sellers and brick-and-mortar businesses.
The decision of this 1992 ruling effectively prevented states from collecting any sales tax from retail purchases made over the Internet or other e-Commerce routes, unless the seller had a physical presence in the state. Due to the rapid expansion and increased prevalence of e-commerce and remote sellers, the decision to exempt these businesses from paying sales tax no longer made sense and worked to the detriment of states in which those businesses conduct sales.
“Because the physical presence of Quill is unsound and incorrect, Quill Corp. v. North Dakota, 504 U.S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, are overturned.” SOUTH DAKOTA VS. WAYFAIR, INC., ET AL. NO. 17-494. ARGUED APRIL 17, 2018 – DECIDED JUNE 21, 2018
The recent decision directly affects several nationwide sellers. In particular, the decision affects remote sellers not currently registered with the state who meet threshold requirements. Those threshold requirements are:
The ruling does not affect any business already registered and collecting sales tax in South Dakota. Those businesses will be grandfathered in under the new ruling.
It is important to understand that this ruling applies to both online and offline sales. Anyone conducting cross-border sales with South Dakota is bound by the new ruling.
The ruling does not change what is or is not taxable, either. Rather, it is establishing that a physical presence is no longer the criteria by which the state decides who collects sales tax. Services, not just tangible goods and personal property, fall under the new rule. This ruling will apply to manufacturers and wholesalers who sell direct to consumers, too.
Exemption certificates will be available for those businesses selling business to business (B2B).
To begin, understanding the definition of economic nexus will help businesses realize what this ruling does in terms of setting precedent for other states that choose to implement the same requirements.
Economic Nexus is a tax collection obligation imposed on sellers based on their level of economic activity within a state. Unlike physical presence, it is based entirely on sales revenue, transaction volume, or both.
These rules vary from state to state. With the recent ruling setting a threshold in South Dakota, it will likely lead other states to utilize the precedent and use the same threshold at a minimum.
First, don’t panic. Contact your SALT CPA or attorney tax advisor and seek counsel on all nexus related requirements and law. If you don’t have one, our partners at Avalara are among the best when it comes to tax compliance and they have an extensive directory of tax experts and SALT CPAs who are able to work with you to get things in order.
You can leverage Avalara Tax Advisory Services (TAS) to:
For an easy reference, download this 2018 Mid-Year Sales Tax Changes whitepaper from Avalara. Inside, you’ll find many details surrounding recent tax changes that could directly affect your business as well as how you can address the best approach to resolve any identified issues.
Experts in all things revolving around tax compliance Avalara makes tax compliance easy and efficiently, enabling you to do what you do best without constantly worrying about rate changes or filing deadlines.
Encompass Solutions, Inc. is an ERP consulting firm and Epicor Platinum Partner that offers professional services in business consulting, project management, and software implementation. Whether undertaking full-scale implementation, integration, and renovation of existing systems or addressing the emerging challenges in corporate and operational growth, Encompass provides a specialized approach to every client’s needs. As experts in identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.