Sales Tax Slice: Post-Wayfair, Some States Invest in Easing Compliance

As states continue to test the bounds of economic nexus, the imposition of tax collection on remote sellers has raised the specter of compliance with the new rules.

Despite the majority of states modeling their provisions after South Dakota’s $100,000/200 transaction threshold, practical differences in how these thresholds are applied can result in startling consequences. South Carolina and Wisconsin, for example, have opted to include both wholesale and exempt sales, in addition to taxable sales, to their threshold calculation. Distinctions like this highlight the importance of ensuring businesses are well informed about the new post-Wayfair tax landscape, and the potential for unintended exposure to tax liability.

Recognizing the value of well-informed taxpayers to successful policy implementation, several states are engaging in nexus training and outreach. Colorado hosted a series of webinars in November to gear up for its Dec. 1, 2018, enforcement date, covering sales tax changes for both in-state and out-of-state retailers. Though Minnesota also offered a webinar, theirs was entirely dedicated to Wayfair’s effect on in-state sellers.

In addition to educating taxpayers, states are also trying to make the transition easier in other ways. For example, Michigan has offered a grace period to remote sellers in its state. Though its nexus rule became effective “after Sept. 30, 2018,” the state’s treasury department announced on Aug. 1, 2018 that it would waive penalties for failure to comply with filing and payment obligations prior to Dec. 31, 2018. Taxpayers would still, however, be liable for resulting interest fees.

Many states have also made investments in their tax administration technology, with Oklahoma and Indiana recently launching online portals to make registration and remittance more accessible. Along these lines, Minnesota launched an interactive sales tax rate map this month that allows users to “visually confirm” their location of interest.

State administrators eager to command a culture of compliance appear to be using the appeal of simplification as well as instructive practices to achieve this end. Whether these methods indeed deliver measurable results may be an interesting lesson for both taxpayers and the states

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: What do you think is the best method to ensure compliance?

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