New Sales Tax Laws for Online Sellers

Posted on: June 29th, 2021

The pandemic brought online furniture sales into the norm.  And the Wayfair online furniture seller quickly became a household name. But Wayfair is famous for other reasons as well.  They are now associated with new sales tax laws that are affecting online retailers.

The Supreme Court ruled in 2018 that the State of North Dakota could tax Wayfair and other online retailers, for sales made in their state, even if they don’t have a physical presence.  After this decision, North Dakota established thresholds for sales volume or value and began collecting sales tax.  And with the loss of retail sales tax revenue caused by the pandemic, other states are looking to recoup those dollars by taxing online retailers.  Even counties and municipalities are doing the same.

While this may be good news for these tax jurisdictions, it has created a nightmare for businesses who sell into states where they do not have a physical presence.  While it was a Supreme Court decision that started these activities, there are no uniform standards that these tens of thousands of governmental bodies must follow.

New Sales Tax Requirements

As a result, new requirements must be parsed out for compliance.  And according to the Journal of Accountancy, this has created several complicating factors:

• Some states allow registration at the state level for all jurisdictions, but others require registration in each jurisdiction separately.
• Each jurisdiction can set its own thresholds for how many transactions, or how large a transaction will be taxed.
• Each jurisdiction can also specify rates for different categories of goods, and apply those rates in their own way.
• The effect dates for these thresholds can be any time.

As if the complexity of these thresholds and filing dates is not enough, States are not waiting for voluntary compliance.  They are getting sales information for themselves from other taxing jurisdictions and third-party services.  Then they are contacting the businesses informing them of their need to comply.

The burden is on the company to prove that it is under the thresholds, and the jurisdiction can assess daily penalties if the companies do not apply.

MLA Tax Experts

Compliance with these sales tax requirements can be a significant burden on the finance professionals in a small to mid-sized business.  But the cost of being out of compliance is even greater, considering the likelihood of a daily penalty.

MLA has tax experts to help determine these sales tax obligations.  We can also provide increased support at the bookkeeping or controller levels to help determine what is necessary for compliance.