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State Sales Tax Changes

The decision to overturn Quill has dramatically affected the way states collect sales tax for remote sellers. Let Vertex be the constant among the ever-changing landscape.

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States are changing their sales tax regulations due to the recent ruling of South Dakota v. Wayfair. Vertex tax technology is here to help your business navigate the changes. Learn more from our frequently asked questions.

What is economic nexus and how is it different from physical nexus?

Economic nexus is when a business meets certain economic criteria (i.e., volume of sales or transactions) that states or jurisdictions have and require sales tax to be remitted. Physical nexus requires a seller to have physical presence in the jurisdiction or state to collect and remit sales tax.

What types of businesses will the sales tax changes affect?

Any business that sells goods and services remotely could be affected.

How will wholesalers and manufacturers who sell into other states (via catalog, phone, email, or U.S. mail) be affected by this ruling?

If a business meets the nexus thresholds, regardless of whether sales are exempt or subject to tax, the business should register within that state. This ruling is applicable to all transactions regardless of method of sale. Wholesalers may not be subject to collection and remittance requirements due to the nature of their business; however, they may have additional filing and reporting obligations.

What should businesses be doing now?

Prepare for increased collection and remittance responsibilities by:

  • Starting to gather data on gross revenues and/or the number of transactions that occur within states where the company sells remotely.
  • Prioritizing states where the company has the greatest economic presence and creating a plan to register to collect and remit sales tax (e.g., via a marketplace, or with a hosted or cloud-based technology solution).
  • Evaluating the financial statement impact of remote seller compliance.
  • Reviewing invoicing processes and controls, as invoicing errors that occur after the decision is finalized likely will result in lower customer satisfaction and more cash flow risks.

Why look at sales tax automation technology?

Vertex tax technology is proven and ready to accommodate any new calculation and reporting requirements following the Supreme Court’s decision to overturn Quill. Vertex provides cloud and on-premise solutions that can be tailored to specific industries for every tax type. For companies that may need to rapidly implement a solution, Vertex Cloud Indirect Tax could be the best option. Vertex Cloud is a SaaS solution that automates end-to-end sales and use tax processes from calculation to returns and remittance. With multiple services levels and flexible pricing models, Vertex Cloud meets the sales and use tax needs for businesses of all sizes across the globe. Vertex also offers over 120 integrations to major providers of e-commerce, procurement, CRM, ERP and other major financial systems.

 

We tapped into our Chief Tax Office to help answer some more commonly asked questions. Read more of those questions here.

 

***These FAQs are provided solely for educational purposes, without any warranty as to the accuracy or completeness of the information included in this presentation. These FAQs are not intended to and do not constitute tax advice or legal advice.  Always consult a qualified tax or legal advisor before taking any action based on these FAQs.