Are you a large company with operations in multiple states? If so, it’s essential you stay up to date on economic nexus or state sales tax changes that may affect your organization. Trying to keep track of all the laws and regulations can be a daunting task, but thankfully we’ve put together guidance designed to help make sense of these complex topics. We provide an overview of what economic nexus is and how it impacts businesses that operate in multiple jurisdictions, as well as outline the specific impact of recent Missouri legislation on companies doing business within its boundaries. With this information at hand, you can be sure your business remains compliant and avoids costly penalties.
What Is Economic Nexus?
First, what is economic nexus? We have covered this topic in depth throughout the years, so for more detail click here and here, but in short: Economic nexus is the result of the 2018 U.S. Supreme Court ruled Wayfair decision, which held that economic presence (measured by dollar amounts of sales and/or number of transactions into a state) was sufficient for a state to require businesses to collect and remit sales tax, instead of just physical presence. In the years since the decision, this set off a scramble by states to create new economic nexus legislation to take advantage of the state-friendly ruling in Wayfair. Part of the challenge for companies trying to be compliant is that the enactment dates vary significantly by state. . Today, every state that imposes state level sales taxes (45 states) has some sort of economic nexus legislation, though the specifics vary by state. Missouri was the very last state to enact economic nexus legislation, which goes into effect on January 1, 2023.
Missouri Enacts Economic Nexus Legislation
If you do remote business in Missouri, you may have to start collecting and remitting sales tax on your sales in the state starting in just a couple of weeks. Currently, the state’s economic nexus threshold is $100,000 in cumulative gross receipts from taxable sales of tangible personal property delivered into Missouri during the previous or current calendar year. It is important to note that sales made through third-party marketplace facilitators also count toward this threshold.
Economic Nexus Challenges And Effects Heading Into 2023
As we approach 2023, economic nexus legislation may affect remote businesses more than ever before. According to a May 2022 Avalara study, 83% of businesses shared that Wayfair impacts how their company does business, which was the highest percentage over the last six survey periods, dating back to 2019. The survey also found that even with some states having over four years of economic nexus legislation under their belts, businesses are still struggling to comply with both nexus and marketplace facilitation legislation, with just 46% of respondents sharing they had made all necessary changes to comply with state enacted economic nexus laws, an all-time low for the survey. With so many companies struggling to meet multistate nexus requirements, could we see threshold standardization in the future?
Could Remote Sellers See Standardization In The Future?
The answer? Potentially. Back in November of 2022, the Government Accountability Office (GAO) weighed in, recommending that Congress enact sales tax regulations across the country for a stronger tax system. They share their reasoning in a report linked here, including that similar taxpayers should receive similar treatment, instead of remote sellers having more complex requirements compared with brick-and-mortar sellers. We will certainly keep you updated on developments, but we’re not optimistic that Congress will act on this. The reason the Wayfair case was the catalyst for the change to an economic nexus standard is because Congress never acted on the changing e-commerce world of the 1990s and 2000s.
Still Have Sales Economic Nexus Sales Tax Questions?
As you can see, many remote sellers struggle to keep up with economic nexus requirements. Working with an experienced team of state sales tax experts like Miles Consulting Group is a great way to manage your economic nexus obligations and avoid an audit. If you have questions about your multistate sales tax compliance or accuracy or have any other sales tax questions, please contact us today. We’re happy to clarify any issues you may be trying to resolve.
