Bloomberg Law reports that state revenue agencies are finally getting serious about requiring out-of-state retailers to collect tax on e-commerce transactions, frustrated that less than half of such sellers are in full compliance with their sales tax rules.
The Wayfair Ruling
Under the US Supreme Court’s holding in Wayfair, it was decided that electronic sellers could have a presence in a state (i.e. taxability) if certain quantitative thresholds are satisfied. Specifically, the Supreme Court suggested that $100,000.00 in annual sales or 200 annual transactions should be sufficient to establish state tax nexus.
Since the Wayfair decision, 45 states have enacted legislation to collect sales tax on e-commerce transactions generating at least $35 billion a year in additional tax for state coffers. However, it is believed that only a small percentage of online sellers have been compliant with their sales tax obligations.
The states are beginning to a more aggressive collection actions now that three years have passed since the US Supreme Court decision. California, Massachusetts, Minnesota, Pennsylvania, Washington and Wisconsin are pursuing sellers with inventory in their states for enforcement. Illinois and Maine are frequently sending out assessments to new registrants asserting retroactive sales taxes for amounts due before the registration date.
Clients should not look at these states in a vacuum as state tax representatives often meet to compare “best practices” for identifying and collecting from delinquent taxpayers. As well, information available from third party processing companies such as Stripe or PayPal make it relatively easy for states to pinpoint delinquent entities.
At Zeifmans, we work closely with our clients and outside sales tax bureaus to implement the appropriate sales tax compliance procedures and to integrate a software platform on to client websites which can effect efficient sales tax collection and remittance. At this point, most US customers expect to pay state and local sales taxes on their online purchases.