Important Sales Tax News for Online Sellers
We live in the Wild West of sale tax, especially when it comes to collecting sales tax as an online seller. New laws and upcoming court cases mean that sales tax is constantly in the news lately. This blog post will offer a quick recap of what’s going on and how this news affects eCommerce sellers.
Use Tax Notice and Report Laws Now in Effect
As an online seller, you are only required to collect sales tax from buyers in states where you have sales tax nexus. If you sell a taxable product to a buyer and don’t charge sales tax to them, then that buyer is supposed to the equivalent of what they should have paid you in sales tax to their state as “consumer’s use tax.” States find it difficult to enforce consumer’s use tax on their citizens. In fact, most people don’t even realize that they owe consumer’s use tax!
That’s why eleven states and counting have passed laws requiring that certain non-collecting online sellers (that means sellers with no sales tax nexus) are now required to either register for a sales tax permit and collect sales tax, or comply with “use tax notice and report” obligations.
These laws generally apply to non-collecting retailers who either make over a certain amount of gross sales in the state and/or who make over a certain number of sales transactions in a state. For example, the threshold in Colorado is $100,000, while the gross sales threshold in Washington and Pennsylvania is $10,000.
In other words, if you do not currently collect Washington sales tax but make more than $10,000 in gross sales to Washington buyers in a year, you are on the hook to do several things like:
- Include a notice that use tax is due on your website
- Include a notice that use tax is due on each of your transactions to buyers in the state
- Send end-of-year tax forms to buyers detailing how much they bought from you & how much use tax they owe
- Send an end-of-year report to the state department of revenue detailing how much your customers owe in use tax
In other words, states have tried to make not collecting sales tax so difficult and time consuming for online sellers that the seller simply capitulates and starts collecting the tax. If you are unsure whether these laws apply to your business, we recommend you speak with a sales tax expert.
Important Sales Tax News for Online Sellers
The South Dakota v. Wayfair Internet Sales Tax Supreme Court Case
On April 17, the United States Supreme Court will hear oral arguments in a case that could change the way sales tax as we know it is collected.
A lawsuit brought by the state of South Dakota is challenging the precedent of “sales tax nexus.” Right now in the U.S., due to the precedent set by the Quill v. North Dakota Supreme court decision, retailers are only required to collect sales tax in states where they have sales tax nexus. But if the Court decides to overturn that precedent with this new case, that means that states can require sellers with no sales tax nexus (i.e. significant presence) in the state to collect sales tax. In other words, online sellers would no longer be protected by the standard set by Quill. As an online seller, you could be required to collect and pay sales tax from buyers in any state, no matter if you have some connection to that state or not. Needless to say, this could be a huge administrative hurdle for online sellers who were accustomed to only collecting sales tax in one or a handful of states.
The court is set to rule on South Dakota v. Wayfair sometime in June of 2018. Keep an eye on the news around that time to find out what will change regarding sales tax for online sellers. And in the meantime, you can read more about the internet sales tax Supreme Court case here.
I hope this post has clarified some of the recent news around sales tax and online sellers. If you have questions or something to say, feel free to ask at our Sales Tax for eCommerce Sellers Facebook group.
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