Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Ryan Prete
Sales tax software compliance officials are telling remote retailers to relax.
“The first thing I tell merchants when they call is to calm down,” David Campbell, CEO of TaxCloud, a tax software company, told Bloomberg Tax. “It’s understandable to be confused—this is definitely a daunting change—but all the necessary tools are already out there, readily available to sellers.”
Campbell’s advice is a result of the U.S. Supreme Court’s June 21 ruling in South Dakota v. Wayfair that threw out its divisive 1992 rule in Quill Corp. v. North Dakota.Quill, which states like the petitioning South Dakota for years have tried to “kill” through lawsuits and regulation, prohibited states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.
Campbell said sellers shouldn’t be overly concerned because no state has been overtly aggressive toward vendors since the ruling. He added that it’s crucial for states to release guidance to assist vendors.
TaxCloud will be ready to handle any new economic nexus model that goes into effect July 1, according to Campbell, who said the company can begin assisting sellers with a new state’s model simply by flipping a switch.
Four states—Connecticut, Hawaii, Kentucky, and Oklahoma—are set to have their economic nexus laws go live July 1.
Many states have provided updates of when they plan to enforce collection obligations and provide guidance to sellers. New Hampshire became the first state without a sales tax to respond to the Wayfair ruling. (Bloomberg Tax provides a roundup below).
The 5-4 majority in Wayfair, led by Justice Anthony Kennedy, suggested strongly that South Dakota’s law would pass constitutional muster; the state’s model imposes the tax collection threshold at 200 separate transactions or $100,000 in in-state sales. But the court stopped short of formally declaring that South Dakota’s law, which dozens of states have mimicked already, was valid in the absence of Quill. The court just made clear that Quill was no longer part of any commerce clause test for when states may impose taxes.
Accordingly, the South Dakota Supreme Court still has to bless the state’s economic nexus model before it can become effective. Still, many project that states will flock to copy South Dakota’s model.
Scott Peterson, vice president of U.S. tax policy and government relations for Avalara, another tax software company, reverberated the need for unflustered sellers.
“Our message to sellers is to take a deep breath, call your accountant, and understand that there’s still plenty of time to register,” Peterson told Bloomberg Tax. “I have people calling me assuming they have to collect nationwide because they do $1 million in total sales, and I tell them to relax, and understand each state’s threshold, because this certainly might not be the case.”
In speaking with a handful of state departments of revenue, Peterson said it’s clear the agencies have sellers in mind.
“The DORs want to give sellers enough time to adjust, so that they aren’t blindsided,” he said. “Many say they expect to implement collection duties on the first of the month sometime this fall.”
A major player in the Wayfair case—Overstock.com Inc.—announced in a June 25 news release that it had “started the process to collect sales tax on purchases made by consumers from the more than 12,000 unique U.S. tax jurisdictions following” the high court ruling.
States have been quick to provide information, including guidance to sellers and collection enforcement schedules, in the days following the Wayfair decision.
Some e-retailers have also reacted to the high court ruling.
Twenty states have enacted economic nexus models, but enforcement dates vary.
With assistance from Andrew M. Ballard in Raleigh, N.C.; Karn Dhingra in Houston; and Aaron Nicodemus in Boston
To contact the reporter on this story: Ryan Prete in Washington at email@example.com
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