If you’re at all involved in the tax world, whether on the accounting side or as a business owner, you should be well aware of the 2018 Wayfair ruling at this point.
As a result of the Supreme Court’s decision in that case, almost every state with a general sales tax has implemented what many in the business refer to as ‘Wayfair Laws.’ More specifically, the ruling opened the door for economic nexus and marketplace facilitation legislation to be implemented across the country.
Now, nearly three years after the decision was rendered , the effects of these Wayfair laws are coming to a head and many groups are calling for reform to reduce the burden on online retailers.
When it comes to economic nexus and marketplace facilitation, it’s not the laws themselves that cause problems, it’s that each state has its own regulations and they can differ wildly across the nation.
Beyond the inherent complications of differing tax rates and the sheer number of state and local sales tax jurisdictions, additional complexity can be found in the application of Wayfair laws. In most states, economic nexus is only triggered when the out-of-state retailer meets a certain threshold for sales, the number of transactions on an annual basis, or a combination of both. The same can be said for marketplace facilitation regulations. However, these thresholds are set by each state separately and the components of how they are measured can vary (i.e.; gross sales vs. taxable sales)..
And all this complication is before we even get into differing procedures for sales tax audits and varying requirements for submitting tax returns.
All said, small- or medium-sized companies that lack large accounting departments, the resources to hire a vendor or the budget to purchase software to manage Wayfair-related tax obligations, are suddenly finding themselves in a rather sticky situation.
While the agreement proved popular in certain circles, only 23 state have adopted it since its implementation, limiting its effectiveness in regards to the Wayfair situation.
Instead, many retailers and concerned parties are looking for federal action. However, any action by the federal government will be slow going and, in the meantime, retailers are struggling to deal with the burden that Wayfair laws have created.
To keep ahead of tax obligations and ensure compliance, the only option for these retailers have is to stay proactive and informed when it comes to Wayfair laws and their application. This is especially hard when these laws continue to change as states refine legislation to best suit their needs.
Three years out from the Supreme Court’s ruling in Wayfair, we still have discussions with clients every day (yes, truly, every day) about how the rules work and how they impact the clients’ businesses. So, of course, we are at the ground level to see how these rules have impacted companies of all sizes. The important thing, from our perspective, is to address these issues early. And make sure you understand any exposure that might be out there relative to retroactive non-compliance. We can assist with identifying and mitigating sales tax exposure risk – we do it, literally, every day! (So you’re in good company.)
If you have questions regarding your online sales tax liabilities, or any other state sales tax compliance questions, please contact us today. We’re happy to clarify any multi-state tax issues you’re trying to navigate.
