Sales Tax Compliance – What You Need to Know
The debate about sales tax compliance started with the confusion of online retailers and whether or not they’d be held liable to pay sales tax for items sold in various states that they were physically located in. And it makes sense. Companies who have physical brick and mortar businesses have to pay sales tax because they’re physically there in the state, doing business and selling items. This though seems to cause concern over the online businesses not paying certain taxes and not being held liable to the same regulations as brick and mortar companies.
When it comes to collecting sales tax, the term “nexus” comes to mind. If you’re unfamiliar with that word, it’s an important one to know, especially when talking about sales tax compliance.
What does Nexus mean?
Nexus is a term that means “a presence or a level of sales that triggers legal obligation, to collect and remit sales tax.” Read on to find out how this can affect certain companies differently.
How are states handling nexus?
This is where it gets interesting. Every state is handling it however they want. The state of Kansas actually recently just made the decision to charge all companies, regardless if they were online or physically there, sales tax. So this means that even if a company is only selling online and shipping to customers in the state of Kansas, that online company has to pay sales tax for each and every sale, regardless.
What is the Wayfair sales tax exemption?
This all started from overturning an issue from 1992 where Wayfair had three online stores that they were charged with not paying sales tax on. What had gone under the radar for many years was now a floodgate of states and lawmakers trying to figure out how to handle online sales and sales tax.
There are a couple of various ways to look at the Wayfair sales tax exemption. First and foremost, there is a ban that was presented by Congress to not allow states to go back and retroactively charge businesses to pay for sales tax that wasn’t paid through these loopholes over the prior years. This is a bit of an exemption that allows retailers to correct this moving forward without having to dig deep and pay a lot of owed taxes. (while many states are fighting this ban, there are some that are moving forward and understanding that sales tax is charged is a “now” thing and not one of the “past”)
Know the state laws
When it comes to complying with sales tax, make certain to verify the state laws of all the various states that you’re selling in. What might be true in one might not be the way for another. As long as you do your due diligence and follow the laws of being compliant, your company should be able to tackle any and all sales tax obstacles and bills that come your way.