The aftershocks of the U.S. Supreme Court’ landmark South Dakota vs.Wayfair decision continue to ripple. A recent podcast provides a helpful update.
It’s been just over a year since the court handed down the decision, ruling that states can impose the obligation to collect and remit sales tax on certain companies even if they lack a physical presence in the state. Things have quickly moved on since then. For a review of the latest developments, check out this podcast interview with Michael Bernard, our chief tax officer here at Vertex: South Dakota vs. Wayfair, One Year Later.
An important highlight is Michael’s discussion of legislation, proposed or final in more than 40 states, that will affect marketplace facilitators. These are organizations that handle funds transactions between the seller and the ultimate customer – think Etsy, Amazon or eBay (three examples that Michael identifies). The Multistate Tax Commission (MTC) and the National Council of State Legislatures (NCSL) have issued model acts aimed at standardizing the ways marketplace facilitators, sellers and states interact. Under these rules, states will look to facilitators to handle collection, reporting and remittance of sales tax, as well as storage of tax information for future audits.
This could be good news for many online sellers, especially smaller companies. Sellers that might otherwise quickly hit transaction thresholds through numerous low-dollar sales may be able to reduce their administrative burden by selling via a marketplace facilitator. “Could” is the key word here; it remains to be seen how many state legislatures follow the model rules laid out by the MTC and NCSL (a topic also discussed here.)
Other highlights of this podcast include:
How and why states are rethinking thresholds for compliance and shifting towards dollar-amount criteria instead of number of transactions;
How sellers are responding to Wayfair and Michael’s tips on how to design your compliance strategy;
Where the biggest risks of non-compliance are found and what to do if you don’t meet the effective date of the marketplace facilitator rules;
Why it’s important to pay close attention to grace periods; and
How states are tracking and monitoring compliance.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.