Service Sales and Wayfair

I was chatting with a new acquaintance who was a headhunter based in Chicago.  When he asked what I did for a living, I said that I did training on sales and use taxes.  I fully expected the conversation to come to a full stop at that point, as it usually does.  Nobody knows what to say when I mention I talk about sales tax for a living.

But not this time.  He said, "Yeah, I heard something about this...a big Supreme Court decision, right?"

I brightened. "Yep, it's a pretty big topic in my world right now."  At least it's more exciting than sales tax holidays and local rate increases.

As the conversation veered into what HE did for a living, I felt the need to expound upon the potential exposure he had (this is why I don't have any friends).  "Just out of curiosity, do you do any work in Pennsylvania?"

"Yep, I have a couple of really good clients there.  Why, do you know anyone who's looking?"  At least we had in common the fact that we were always working.

"Did you know that headhunting (employment agency) services are taxable in Pennsylvania?"

"What are you talking about?  It's a service.  Services aren't taxable."  He's from Illinois so he's allowed this bit of naiveté.  

"They are in a couple of states - including Pennsylvania."

"Yeah, but I'm in Chicago.  I never even go to Pennsylvania...I do everything by phone."

"Yeah, but the services are being received in Pennsylvania.  And with that new Supreme Court decision, they can go after you, even if you've never set foot in PA.  How much do you bill to PA in a year?"  By the way, cool people just say PA instead of all those syllables.

He kind of looked off into space, "Oh, at least $200,000."  

"Yep, you should be worrying."

Again, no friends.

People who sell services almost never realize that the services might be taxable somewhere.  In the past, that probably didn't make any difference because of the Quill rule about physical presence. My new friend never visited PA and had no physical presence there.  Therefore, no problem.
 
But in a post-Wayfair world, the physical presence hurdle has disappeared.  Now it's just a question of volume of sales.  So if a service provider does enough business in the state, he is probably going to be liable for taxes.

Three pieces of advice that apply to everyone, but to service providers in particular:

1.  List the states in which you sell more than, oh, say $100,000 per year, or make 200 transactions per year (these are the Wayfair thresholds which may or may not be the minimums*).  I hope your accounting system can provide this information.  Otherwise, find a temp to do some serious spreadsheeting (that temp might be taxable too!).

2. Is what you sell taxable in those states?  This is a different type of research.  Use whatever research tools you have available.  

3. If the result is that your sales in a state exceeds those thresholds, contact your friendly sales tax professional.  Then, based on her advice, panic.

*Most states seem to be gravitating towards these numbers.  But not all of them. 

Jim Frazier - The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Life Coaches?

I got this question the other day, and since it combines a couple of issues, here ya go...

"I am a life coach. I coach people in various states via phone or Skype. Are these services taxable? What if I physically go to a client location?"

First of all, are your services taxable?

There are a few states where what you do is taxable. You need to research those states and see for yourself. Keep in mind that they may not use the term "life coaching".  But look deeper at things like training, consulting and professional services.  And a few states tax ALL services by default. So your services are going to be taxable somewhere.

This doesn't necessarily mean you have to tax the services that you perform over the phone or Skype.  This only is necessary, for right now, if you actually have nexus in the state where the buyer is receiving the benefit of your services.  Based on my assumption about your business model (I actually know a couple of life coaches), your only physical presence in a state is going to be YOU.

Are you required to collect taxes in those other states?

If you GO TO THAT STATE and perform services, do marketing, etc., you probably have nexus in that state.  Which means you may have to collect that state's taxes (assuming your services are taxable in that state.   

And if you subsequently perform your services online or on the phone, then you will need to collect taxes on your services for the states where you have nexus.  

Note that, at some point in time, your nexus in a particular state will "wear out" if you don't revisit periodically.  So you got that going for you, which is nice.

So, to summarize

1.  Your services may be taxable, depending on the state.
2.  In those states, if you go there and do work, you'll have to collect and pay the tax
3.  When you perform the services online after you've been to the state, you'll have to collect and pay the tax.

Life sucks, doesn't it?

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The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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I hate to make you cry...but....

I was doing a seminar in southern state a few years ago.  And there was a young woman in the class who had just been handed the sales tax responsibilities for her company.  She was in AP and, I'm guessing, just a few years out of school.

She was pretty sharp and stayed with me for the whole day.  But at the end, when I started talking about nexus, she looked a little green.  After the class, she came up to me.

Nice woman: "Uh, we sell fishing tackle* and we have only been filing in our state, no others."

Mean me: "Uh, huh - then what you sell is generally going to be taxable"

Nice woman: "Right.  It certainly is in our state.  Uh, we have independent sales reps that are all over the country.  Do we have nexus in all of those states? They're independent contractors if that helps."

Mean me: "Probably in most of them.  And the fact that they're independent contractors generally doesn't make any difference.  Depending on the state, one or two visits a year will be enough to do it.  In other states, they're a little more laid back.  How often to your people visit the states?"

Nice woman: "Oh, way more than a few times a year.  Every state has outdoor shows and fishing tournaments.  Our people are at all of them."

Mean me: "I hate to say it, but I think you've got nexus in pretty much every state that has a sales tax.  All of them."

Nice woman: "But we only sell off our website."

Mean me: "Doesn't make any difference. Sorry."

At this point in time, tears started flowing.  I've been doing these seminars for over a decade and I have never made someone cry.  I can only imagine how terrified she was.  She was going to have to tell her boss that they have to go from filing a return in just one state, to filing returns in 45 more.  Ugh.

I spent about 45 minutes with her after the class talking about her options, giving her names of consultants that could help, and generally how to go about dealing with this.  Essentially, I was patting her on the shoulder and saying "there there."  I truly ruined her day.  And I never heard from her again.

Don't let nexus ruin your day.  If you ship to multiple states, make sure of your nexus status NOW.  Because we don't want your staff crying.

There's no crying in Sales Tax.

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*Fishing tackle was not the product. I'm substituting here to protect they're identity. And I used fishing tackle because I have LOTS of fishing pictures.

The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Sales Tax Tip: "When did you decide about nexus?"

"Do you have nexus in Minnesota?"

"Nope" 

"When did you decide this?"

"Oh, about 5 years ago." 

"Has anything changed in the last five years?"

"No, I don't think so."

"Have you added any sales staff in the last five years?"

"Oh, yeah, sure."

"Are any of them visiting Minnesota once in a while?"

"Yeah, there's Tony.  He covers that part of the country.  He really whines about it in the winter, too."

"Ahem."

"Oh.  Right.  Excuse me, I have to make a call."

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This small drama presented by The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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Surveys? Freaking Surveys??? (warning - snark attack)

I just saw a  survey sent to state revenue officials regarding sales tax nexus. I've also seen one that involves enforcement of drop-ship rules.  There are others around. 

I'm not going to discuss the survey results - I'll leave that to the publishers.  The point is that, when it comes to some topics, we have to figure out how the state is going to enforce the law based on surveys!  Really?

My admittedly naive philosophy is that the laws should be written in some official place.  They should be in statutes, regulations, bulletins and court cases.  These are things that someone can look up.  They shouldn't have to be compiled by a publisher doing a survey.

I'm not blaming the publishers.  I'm blaming the states for coming up with nutty positions about gray areas based on stupid and complex laws that they created.  The publishers are just trying to provide us with some useful information.  I get that. However, I can see some problems.

Let's say that you take a position, based on the latest survey done by Joe's Sales Tax Consultants and Tattoo Parlor.  The survey measured the amount of time you must have a service person in a state before you have nexus.  It mentions Frank Derp as the source of the information for that state, and says that you would need a repairer in the state 10 days in order to have nexus.  Therefore you've carefully managed your visits to the state so that you're only there 9 days.

When you get audited, the auditor says you have nexus.  "But wait!" you splutter, "we kept it to 9 days and this survey (which you triumphantly slam on the desk) says it's 10 days."

There are at least three unpleasant ways this can go for you: 

1.  The auditor says, "I don't care what some survey says.  I talked with my boss and he said you've got nexus.  So that's it."

2.  The auditor says, "Oh yeah, that answer was given by Frank Derp.  I heard about that.  When the survey came in, they brought it up at the staff meeting.  Nobody wanted to fill it out, so Frank got stuck with it because he was sick that day.  We all laughed when we saw the answers he gave.  He was high on Dayquil."

3.  The auditor says, "Oh yeah, that answer was given by Frank Derp. He was an idiot.  He got fired a month after that survey came out."

This is the problem with surveys.  They're not official.  I agree they're necessary to be able to get some feel for the squishy enforcement positions of the state.  But if it's a gray area that requires a survey because the official laws aren't specific enough, proceed carefully.  Because the only laws that really count are the official ones.  And if it's gray enough to have to do a survey, how can you be sure the auditor will stick to the survey and not use his own, or his supervisor's judgement?

Your option, if the auditor sticks to his guns, is to fight it...which is going to cost you money.  And do you really think, if you wind up fighting this all the way to court, that the judge is going to pay much attention to what Frank Derp said?

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Do I have to get exemption certificates in states where I don't have nexus?

I get this question every once in a while - so hey, it's a blog entry!

The situation is that you're selling something taxable to a customer in state A.  You're in state H.  Do you have to get an exemption certificate from them when you don't have nexus? 

It depends.

1.  How sure are you that you don't have nexus?  Nexus situations can change.  You may have decided in 2010 that you don't have nexus in state A, but in the meantime, those jerks in sales have made a couple of big sales there, sent in a crew of installers, made arrangements with a repair firm to provide service, and the VP of sales has been visiting every couple of months.

If you haven't figured it out, you now have nexus in state A.  But if you're basing your assumption on the decision you made in 2010, you're gonna be in trouble.

It would sure be nice to have that exemption certificate.

2.  How much of a hassle is it to get the certificates?  If your customer in state A is practically begging you to take his certificate, then, oh, what the hell, take it.

On the other hand, if your customer is one of those pain-in-the-butt mega-retailers who refuse to cough up the resale certificate, then, maybe you want to take the chance.

So the two factors to consider are your confidence level in whether or not you have nexus balanced against the hassles of getting certificates. 

Another thing to consider is that Congress may eventually pass something that looks like the Marketplace Fairness Act.  That means that if you're a larger company*, you'll eventually be required to collect taxes in all states, regardless of whether or not you have nexus.  So you'll need to be getting certificates from all the states anyway.  But this is probably a couple of years off (I hope).

Frankly, putting on my strict, no-risk controller's hat, I'd establish a policy that we get exemption certificates from everyone.  That way if that dang sales guy goes behind my back to state M, I'm covered. 

*part of the argument is what "large" means

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
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It's Only Fair...

I came across this article this morning, and it's so brilliant in its insight, I just had to comment here and link to the article.  Hat tip to @StateTaxNews for the link. 

I'm not a big fan of the Marketplace Fairness Act.  For one thing, I'm always suspicious of any use of the word "fair" by a politician.  But, as this article points out, fairness can run both ways.

MFA would require that businesses collect tax for other states if they ship to those states.  It's insanely complicated. But what about people coming into a state to avoid taxes in their own state.  Think about people from Wisconsin going to Minnesota to buy clothing (the example in the article).

But what about people in Washington state who go to Oregon to avoid sales tax on appliances (this is a big problem).  Should Oregon retailers be required to collect Washington sales tax if all they do is put the TV in the customer's SUV?  Ditto for retailers in New Hampshire and Delaware.

What about people from Chicago, where the sales tax rate is insanely high, who go to the outlet malls in Kenosha, Wisconsin to take advantage of a substantially lower sales tax rate.  Shouldn't those malls be required to collect the tax for Chicago?

If you're going to make retailers from other states collect taxes based on where they ship to, it seems clear to me that retailers in other states should collect the taxes for people who are trying to avoid tax in their home state.

Seems only fair.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com
and there's more sales tax news and links here http://salestaxnews.blogspot.com


Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. And if you're desperately trying to see the connection...Superman stands for "justice".  Get it?

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Decision Tree for Exemption Certificates from Other States

 
This particular topic was covered four years ago.  But since I get questions related to number 3 so often, I thought it might be time to brush it off and add a few extra touches.

What are the seller's responsibilities are when they ship to another state?

Question 1: What state does the delivery occur?  This determines the state rules you follow.  If you ship from Alabama, but the buyer receives the goods in Rhode Island, then you need to check Rhode Island's rules.

Question 2: Is what you sell taxable in that particular state?  Now don't go making any assumptions based on what you're used to .  Remember, the rules can be completely different in the other state.  You need to make sure!  If you are certain that what you're selling isn't taxable there, then you can now stop, take a deep breathe, and relax. If, however, your sale is taxable there, then I'm afraid you'll have to proceed to question 3.

Question 3.  Do you have nexus in that state?  It's WAY more complicated than what you think.  It's not just a matter of having an office there.  There are some very surprising ways that you can have nexus in a state. If you have nexus, you need to get the exemption certificate.

 But if you're SURE you don't have nexus, you are finished.  You can stop.  Unless...

There are some folks that will get certificates anyway, even if they don't have nexus in the state.  They do this for three reasons:

a. It's easier to just establish a policy that the company will always get certificates if the sale is taxable.  Procedures often work better with less conditional statements.  This keeps it simple for the staff, although it's more work.

b. They may have made a mistake in determining their nexus in the state.  Or it could have been a judgement call.  It might be safer to get the certificates just in case the auditor decides against them.

c.  Things change.  The company might not have nexus today.  But all it takes is for marketing to assign a sales person to regularly visit the state and you suddenly have nexus.  So collecting the certificates now is a protection against any future whims by those people in the sales and marketing department.

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The Sales Tax Guy http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Great Article: Amazon Taxes Are The REAL Hunger Games

from Forbes and Robert W. Wood

A nice, concise explanation of why Amazon has not collected taxes in the past, why buyers still have to pay them, and what the states are doing about it.  Enjoy the article. 

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: Can Sales Taxes Bankrupt a Company?

These articles should scare the hell out of you.  It's a true sales tax horror story. The first is from Bellatoris Consulting, LLC who linked to the far nastier story from the Portland Business Journal that tells the tale of a mattress retailer in Portland, Oregon who got tangled up with nexus issues in Washington.  I've always figured that states preferred to avoid bankrupting businesses.  It's bad policy to put voters out of work.  But this is a business in Oregon.  So what the heck does Washington care?

Read the article and be scared.  Particularly if a significant amount of your business comes from the state just across the river.   Enjoy the article.  

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: The Biggest State Tax Story of 2011: Internet Sales Taxes

from Sylvia Dion at The State and Local Tax "Buzz"

In 2011, more informed articles, misguided editorials, and downright scary blog posts were written about the ratcheting up of the nexus wars than any other sales and use tax topic.  The states are looking for every scrap of sales tax revenue they can find, and they have online retailers in their sites. Sylvia provides a handy summary of what happened, and what Congress is doing about it.  Enjoy.

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

And this is an article that I'm more than happy to see Sylvia write rather than me!

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: A Summary of the Federal Nexus Bills

from stateandlocaltax.com

A nice summary of the different nexus bills that are currently in Congress intended to allow states to force nexus on out of state sellers (like Amazon.com).  Clear, concise and with more info than I expected.  Heck, it answered MY questions.

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: Check your nexus footprint

from salestaxinsight.com

I've got a new term (actually, I've heard it before, but I'm gonna start using it now).  This short article talks about what happens when a state discovers you and thinks you have nexus.  It talks about how you should evaluate your "nexus footprint" on an annual basis.  This way, you make sure that your business hasn't changed since the last time you checked on nexus.

I also didn't know that November was nexus awareness month.  Must have been before my time.

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: The Marketplace Equity Act: The New Competition on the Block

from Sylvia F. Dion at www.salestaxsupport.com

At the time Sylvia wrote this, there were two bills in Congress to allow states to force tax collection on companies that do not have nexus in their state (what have been commonly and annoyingly called the Amazon.com laws).  Now there are three such pieces of legislation that have been introduced.  I try to avoid looking at proposed laws until someone actually signs them.  Thank goodness Sylvia finds this interesting, and she's written a nice summary and comparison of the first two bills.  I'm sure that the third bill will fall under her pen shortly.

In the meantime, if you want to get up to speed on the concepts and the first two versions, here ya go. 


This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.  And yeah, the picture isn't of Congress or the Capitol.  But I don't have a good picture of either, so you'll have to enjoy this one.  Sheesh.

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Who CARES if they have nexus?!?

I've heard these two questions so many times, including today, that I feel the need to put them to rest.  So if I've suggested you read this article in response to an email, then ya best read it now.

Question 1: My vendor has nexus in our state.  Shouldn't THEY be charging tax?  

In a perfect world, yes, they should be charging you tax.  But, you may have noticed that we're not in a perfect world.  Your vendor may not realize they have  nexus, or they do realize it but choose to ignore it.  If you call them and insist they collect, you run the risk of:

a.  Ticking off your vendor
b.  Having to educate them about nexus, which is above your paygrade
c.  Having them say, "OK, we'll start charging tax," just to make you shut up.  This will come back to haunt you. 

You could rat them out to your state's department of revenue, but that just seems...tacky.

But who cares?  Just accrue and pay the use taxes the vendor should have charged you, and move on.  There's no economic cost to do this, and if you have a decent system in place, not really any more work.

There is a risk however, of the vendor getting caught in a couple of years. They may come back to you for the tax that they didn't collect when they should have.  Protect yourself from this hassle by having a clear audit trail on the invoice showing that you HAVE self-assessed use tax.


Question 2:  My customer is based in Canada.  I'm in Nebraska.  He has nexus in Nebraska.  I know this because I'm delivering the shipment to his warehouse here in Omaha.  He says I shouldn't charge tax because he's in Canada.  What should I do?

Charge Nebraska sales tax.  Their nexus isn't the issue when it's something YOU sell.  Nexus is only relevant to determine if a seller has to charge tax in states the seller ships into.  If you're a customer of this company, see question 1.  You shouldn't care about the buyer's nexus in your state.  What you need to care about is properly taxing your sale.

And generally, that means to base your decisions on where the delivery occurs.  Since that happened in Nebraska, you collect Nebraska tax.  If they claim the purchase is exempt because they're in Canada, ask them for proof.  Point out that if you go to Canada and buy something in a store there, you are not exempt from Canadian tax. 

There might be other exemptions (eg. manufacturing, resale, etc.).  But I know of no exemption in Nebraska for material delivered in Nebraska just because the customer is Canadian.  Again, ask them for evidence that they are exempt.  They should be able to provide you with a Nebraska or US law.

As a point of comparison, if you shipped the goods directly TO Canada, then they would be right.  The delivery point is Canada and Nebraska sales tax would no longer apply.  But that's not what's happening.

See why that delivery point rule is so handy?

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

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Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.  By the way, I have no clue why I used it.  It just seemed seasonal..

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Great Article: How a Color Coded Map of the US Can Reduce Sales Tax Nexus

This is from TaxConnex and talks about a simple, graphic and proactive way for a business to manage nexus.

http://www.taxconnex.com/Blog------/bid/70899/How-a-Color-Coded-Map-of-the-US-Can-Reduce-Sales-Tax-Nexus

This link is a new series we're offering called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy and learn.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

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Link: Top 5 Activities that Cause Nexus for Technology Companies

TaxConnex recently published an excellent white paper that really covers all the bases when it comes to having nexus in a state.  They describe WHY nexus is a problem and how you get it.  And don't let the title fool you.  While it's directed at technology companies, fishing tackle companies will find it useful as well.

http://www.taxconnex.com/top-5-activities-that-cause-nexus-for-technology-companies/ 

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Links- Nexus

Here is a selection of recent links I've come across

Navigating Nexus - Multistate business operations face a wide variety of state taxes
Nice details about how you are exposed to nexus - Journal of Accountancy

Amazon offers Texas 5,000 jobs in trade for sales-tax exemption Seattle Times

Texas Two-Step—One Step Forward, One Step Back Avalara

Internet company FatWallet hops the Illinois border to Beloit Wisconsin State Journal

Map: Amazon’s sales tax battle Geekwire

Texas Clears Up Server-Nexus E-Commerce Sales Tax Issue ecommercetimes.com

Sales Tax Nexus - Victory for the Internet Retailers! taxconnex.com

Working up a tax storm in Illinois washingtonpost.com

Internet Sales Tax to be Introduced in US Senate foxnews.com

The Problem With Online Sales Tax cpatechreviews.com

Barnes and Noble Wants Amazon's Rejected Affiliates auctionbytes.com

On Line Travel Services Subject To Sales Tax in D.C. sabrix.com

Sales Tax Nexus Changes Will Surprise You taxconnex.com

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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"Main Street" retailers better be careful what they wish for

Most of the sales tax news that I see these days seems to have something to do with states going after Amazon.com.  The discussion includes other big Internet vendors - but I'll just say Amazon.com, because that's what everyone else says. 

Many of the articles, letters, blogs, comments, and editorials go something like this:

"In order to be fair, Amazon.com should collect sales tax so that the local retailers, who have to charge sales tax, can compete fairly.

This opinion reflects a basic ignorance of the system.  It's USE tax when it's an interstate shipment.  I know, I'm being fussy, but the level of ignorance displayed drives me crazy.  Now if they just took a few webinars...

There's also this common theme:

The state is out of money.  If we can make Amazon.com pay taxes, we'll be in high cotton."

Which misses the point.  The local customer is paying the taxes. Amazon.com is just being forced to collect it.  Make no mistake...there is no shifting of the tax burden to Amazon.com. 

And this one

"The state should fix this."

Which is wrong. The states have been trying to do this with aggressive nexus assessments and silly laws involving "associates" in the states.  It hasn't worked out really well.  The states can't fix this.  It's an interstate commerce issue.

But every once in a while, someone makes the correct observation: 

"Congress needs to fix this."

Now they've identified the problem.  Congress (or the Supreme Court) can fix this by making nexus much simpler.  All those "Main Street" local retailers argue that if Amazon.com ships into a state from out of state, they have to charge the local state's tax. OK, Congress can wave the Magic Nexus Wand and make this the law of the land:

Regardless of their physical presence in a state, the seller must charge the taxes for the destination state and remit the taxes to that state.

Nice and simple.  And fair.

Full disclosure: I don't want this to happen.  Then nobody will sign up for my nexus webinar.  I much prefer it complicated.  ;-)

But, please remember that all those journalists, editors, chambers of commerce, and local businesses are clamoring for fairness.

Well, folks, here's the part that you don't realize you're wishing for.

If you're like most "Main Street" businesses, you also have a web site.  And that almost always means that you sell stuff outside of your state.  Guess what?  YOU will have to start charging tax on your shipments too.  Yep.  You want it to be fair, don't you?  If Amazon.com has to charge taxes when they ship into your state, and steal your business; then YOU should have to charge taxes when you ship into some other state and steal someone else's business.

I can just hear the howls of protest:

"Oh, no.  There will be a dollar limit.  Only sellers who have annual sales in excess of $100,000,000 will have to deal with this 'fairer' rule."

That doesn't sound fair to me.  And it doesn't sound fair to that guy in the other state whose business you've stolen.

I also wonder if the newspaper publishers who are demanding this "fairness" realize that some of the states where they sell subscriptions actually do tax newspapers.  Which means even THEY will have to start charging taxes and filing in those states. And, of course, the famous newspapers probably sell hats, t-shirts, etc. from their web pages.  Guess what?  Hee hee hee.

And for the politicians.  Your constituents, George and Martha, will suddenly be unhappy when they realize that "making Amazon.com pay sales taxes" really means that George and Martha will have to start paying those taxes.   Amazon will lose business because they have to charge tax.  But George and Martha will have to pay it. 

Be careful what you wish for.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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A Sneaky Sales and Marketing Trick - Revisited

Listen up sales and marketing people.  Since I'm currently working on educating you, here's an important tip that I wrote back in June 2010.

If the following conditions are happening to you, you really, really need to read that article.

1.  Do you have an out of state competitor who regularly steals business from you because they don't have to charge tax, but you do?

2.  Do you know, or at least suspect, that they have nexus in your state? 

3.  Are you sneaky and nasty?  Actually, that's kind of a silly question if you're in sales.  I kid.

Then take the steps mentioned in this article.  You probably didn't know you could do these things (neither do most accounting types, so don't blame them), but depending on your state's laws, you can at least make some trouble for that competitor.

Enjoy. 

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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