Wayfair Decision & After Effects on Sales Tax
The hunt for the right Sales Tax is always continuous in America. Americans are paying from 2.9% to 7.25% of the goods’ prices in most of the states while purchasing the goods. But, some states levy almost no sales tax. Bit confusing, right?
June 21, 2018, has been a historical day in the US as the Supreme Court favored the state in the case of South Dakota vs. Wayfair, Inc. This defined decision allowed the states to necessarily make the remote sellers gather and remit sales tax. This ruling is surely an usher for the new era of sales tax and sales tax filing systems because this is an end for the online shoppers to reap the advantages of untaxed purchases. How is the post Wayfair act? Everyone is excited to understand more about this sales tax regulation. Right? Well, the Wayfair nexus is now emerging in every state.
Wayfair sales tax nexus is affecting several decisions related to sales tax. It can be quite tricky if every jurisdiction defines nexus in a different manner. With Wayfair tax policy, the sales tax is now on a turning point making this world of sales tax filing the Wild West area not only for the online retailers but entirely for the brick-and-mortar stores, wholesalers and manufacturers in the same way.
The Wayfair sales tax nexus is affecting the online retailing operations on a greater note. The internet retailers have acquired small operations and making huge internet sales, but now they have to gather jurisdictions wherein the historic entity is having the physical presence. The Wayfair sales tax case led to the addition of over 25 new states and they have to be registered by the domestic company to collect and file the retail sales. Moreover, it is a necessity for the foreign manufacturing entity to register in about 35 states.
On a noble thought, this new jurisdiction in sales tax compliance has mandated for both online and offline retailers to attain resale documentation for supporting the non-taxable sales in every state.
It is doubtless that this Wayfair act is presenting a new phase for retailers to be compliant with the national sales tax policy. Now, the companies are prioritizing three key elements post the Wayfair sales tax nexus. The first element is that the retail companies cannot rely on the sales tax software because no such software is capable to source correctly for all transactions. Secondly, the companies need to decide if they want to co-source/outsource certain sales tax functions or not. The third element is that the companies have to indulge in accurate planning to be able to mitigate extra sales tax compliance costs.
You need to understand that Wayfair act and its aftermath have left the majority of companies with almost no exposure to sales tax due to massive sales tax compliance burden and also due to substantial cost in the way of penalties, interest and huge tax liability if it is unpaid by the customer.
The Wayfair decision is making states strong in taxing the remote retailers and giving states a powerful way of recouping the related revenue.
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