Software Providers Can Help with Collection Process

Navigating the Online Sales Tax Collection Process

By Larry Weindruch, NSGA Director of Public Affairs

In the wake of the U.S. Supreme Court ruling in South Dakota v. Wayfair that eliminated the physical presence standard blocking states from requiring remote online sellers to collect sales tax, the question facing many sporting goods retailers and dealers who sell out of state on the Internet is “what’s next?”

This ruling does not affect in-store transactions. The big question concerns members who sell on their websites to out-of-state customers and don’t yet collect sales tax. Not every state has a remote sales tax collection law on the books.

Bloomberg has compiled this listing of implementation dates and nexus thresholds of 26 states that have enacted economic nexus statutes: • Alabama (Oct. 1, 2018), $250,000 in-state sales • Connecticut (Dec. 1, 2018), 200 transactions and $250,000 in-state sales • Georgia (Jan. 1, 2019), 200 transactions and $250,000 in-state sales • Hawaii (July 1, 2018), 200 transactions or $100,000 in-state sales • Illinois (Oct. 1, 2018), 200 transactions or $100,000 in-state sales • Indiana (Oct. 1, 2018), 200 transactions or $100,000 in-state sales • Iowa (Jan. 1, 2019), 200 transactions or $100,000 in-state sales • Kentucky (Oct. 1, 2018), 200 transactions or $100,000 in-state sales • Louisiana (Jan. 1, 2019), 200 transactions or $100,000 in-state sales • Maine (Implementation date TBA), 200 transactions or $100,000 in-state sales • Massachusetts (Oct. 1, 2017), 100 transactions and $500,000 in-state sale • Michigan (Oct. 1, 2018), 200 transactions or $100,000 in-state sales • Minnesota (Oct. 1, 2018), 100 transactions or $100,000 in-state sales in at least 10 transactions • Mississippi (Dec. 1, 2017), $250,000 in-state sales • North Dakota (Oct. 1, 2018, or 60 days after a remote retailer meets the state’s threshold — whichever is later), 200 transactions or $100,000 in-state sales • Ohio (June 30, 2017), $500,000 in-state sales • Oklahoma (July 1, 2018), $10,000 in-state sales • Pennsylvania (April 1, 2018), $10,000 in-state sales • Rhode Island (Aug. 17, 2017), 200 transactions or $100,000 in-state sales • South Carolina (Nov. 1, 2018), $100,000 in-state sales • South Dakota (Nov. 1, 2018), 200 transactions or $100,000 in-state sales • Tennessee (currently on hold because of litigation), $500,000 in-state sales • Utah (Jan. 1, 2019), 200 transactions or $100,000 in-state sales • Vermont (July 1, 2018), 200 transactions or $100,000 in-state sales • Washington (Oct. 1, 2018), 200 transactions or $100,000 in-state sales • Wyoming (Oct. 1, 2018), 200 transactions or $100,000 in-state sales

Five states (New Hampshire, Oregon, Montana, Alaska, Delaware) do not have state sales taxes and are not inclined to collect sales taxes for 45 states and the District of Columbia. They have said doing so would be an unfair burden on businesses in those states.

Further complicating the matter is a bill introduced in the House of Representatives by Rep. Jim Sensenbrenner (R-WI). This bill, the Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6814), would ban states from retroactively imposing sales tax collection duties on remote online sellers; require all states to push back economic nexus implementation dates to Jan. 1, 2019; and establish a small-seller exemption, meaning a remote seller with gross annual receipts below $10 million in the U.S. is not required to collect and remit sales tax.

“For nearly a decade, NSGA has actively advocated for a federal legislative solution to the unfair advantage held by remote online sellers,” NSGA President & CEO Matt Carlson said. “We continue to advocate for the Remote Transactions Parity Act (H.R. 2193) in the House and Marketplace Fairness Act (S. 976) in the Senate, both of which would create a legislative standard that all states with a sales tax could follow.

“We don’t feel that Rep. Sensenbrenner’s bill is the answer. States have not yet passed bills that include retroactive collection of sales taxes, and most have followed South Dakota’s Supreme Court-tested standard for economic nexus.”

Another factor brought to NSGA’s attention puts focus on the team dealer business. There have been reports of schools that placed orders through their team dealer and received the orders drop-shipped directly from the manufacturer being charged sales tax despite the schools being tax exempt. NSGA is investigating the issue.

To help retailers and dealers comply, there are seven software providers available to help with the collection of remote sales taxes, should a business trigger the substantial economic nexus in a state. In many cases, the software may be free to the online seller and take on the audit liability for the seller. The software works as a plug-in with the business’s existing inventory and shopping cart software.

For additional information, please visit www.streamlinedsalestax. org/index.php?page=CertifiedService-Providers

Frequently Asked Questions About Online Sales Tax Collection

The Streamlined Sales Tax Governing Board has compiled a list of frequently asked questions (FAQs). The answers contain links to additional information, including how to contact every state’s department of revenue or taxing authority. The Board oversees the Streamlined Sales and Use Tax Agreement, the purpose of which is to simplify and modernize sales and use tax administration to substantially reduce the burden of tax compliance.

There are 24 states that have adopted the simplification measures in the Agreement (representing more than 31 percent of the population). More states are moving to adopt the simplification measure.

Q: What does the South Dakota v. Wayfair U.S. Supreme Court Decision mean?

A: The United States Supreme Court ruled in South Dakota v. Wayfair on June 21, 2018, that states can require sellers to collect and remit sales or use tax on sales delivered to locations within their state regardless of physical presence.

Q: Who is a remote seller?

A: A remote seller is generally a seller that does not have a physical presence in a state and does not have any other legal requirement to be registered, but who sells products or services for delivery into that state. You will need to check with each state to determine if you are required to register in that state.

www.streamlinedsalestax.org/index. php?page=Certified-Service-Providers

Q: When must a remote seller begin collecting and remitting sales tax?

A: Registration requirements vary by state. Contact the state directly to determine your registration requirements.

If you have a physical presence or other legal obligation to collect and remit sales tax for a state and are not already registered, you should register immediately.

Q: I already collect and remit sales tax. Should I continue?

A: Yes. If you are already registered and collect and remit sales tax or remit sales tax through a third party, such as a marketplace facilitator, you should continue to do so.

Q: I want to start collecting and remitting now. What should I do?

A: Selling in multiple Streamlined States? You can register to collect and remit sales tax in all 24 Streamlined member states by completing one simple online application through the Streamlined Sales Tax Registration System (SSTRS). There is no fee to register using the SSTRS.

www.sstregister.org

Each state will send you information related to its sales and use taxes and you will be responsible for filing returns with each Streamlined State.

Q: Only need to register in a few states?

A: You may register separately for each state by completing each state’s registration form.

www.streamlinedsalestax.org/index.php?page= State-Websites

Q: Don’t want to register through the SSTRS?

A: You can register separately for each state by completing each state’s registration form.

Q: Selling in a state that is not a Streamlined State?

A: You will need to register by completing that state’s registration form.

Q: Do you need help with your sales taxes?

A: The Streamlined Sales Tax Governing Board has contracts with Certified Service Providers (CSP) that can handle nearly all seller’s sales and use tax responsibilities.

Any remote seller registered through the SSTRS may contract with a CSP. There is no charge for CSP services in the Streamlined States where the seller is a remote seller.

It is recommended that you contact the CSP to discuss their services prior to registering. If necessary, the CSP can register your business for you. If you register prior to contracting with the CSP, you will be responsible for filing returns until the CSP is ready to provide its services to your company. The CSP will provide the services necessary to:

• Register a seller in all Streamlined member states • Set up and integrate the CSP’s software with the seller’s system • Identify which products and services are taxable • Determine the appropriate sales or use tax rate and calculate the tax due at the time of the sale • Prepare and file the required sales and use tax returns for each of the Streamlined States • Remit the tax to each of the Streamlined States • Resolve any notices or audits by any of the

Streamlined State

To learn more about the CSP program, see the FAQs related to Certified Service Providers at www.streamlinedsalestax.org.

Q: I have a question for a specific state, what should I do?

A: If you have questions related to a specific state’s laws and requirements, please contact that state directly.

www.streamlinedsalestax.org/index.php?page=StateWebsites

For more information, please contact NSGA Director of Public Affairs Larry Weindruch, lweindruch@nsga.org, or call (847) 296-NSGA (6742), ext. 1290.