Matthew Hammond - my-CPE.com · • By registering in the SST program with a CSP like Avalara, your tax compliance process will be streamlined and the cost of compliance can be reduced:

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Matthew Hammond

Sr. Sales Manager, Avalara

[email protected]

USING QUICKBOOKS TO MITIGATE RISK IN SALES AND USE TAX COMPLIANCE

Agenda

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Sales Tax Overview

South Dakota vs. Wayfair, Inc. Ruling

Economic Nexus

Streamline Sales Tax

Automating Sales Tax Compliance

Q&A

Sales Tax Overview

©Avalara. Confidential and proprietary. 4

Your company is responsible for collecting & remitting sales tax on behalf of it’s customers for taxable sales.

Over 12,000 taxing jurisdictions in the United States.

Exceptions:

•Product / service-based statutory exemptions.

•Customer-based exemptions (exemption certificates).

•Taxability exemptions vary by state.

Key transaction inputs:

•WHO - Customer (determination of customer-based exemptions).

•WHEN - Invoice date (tax rate determination).

•WHERE - Ship-to, ship-from, order acceptance addresses (taxing authority, or “sourcing”).

•WHAT - Product / service (determination of product-based exemptions).

Sales Tax is hard

Nexus

Sales tax nexus is the connection between a seller and a state that

requires the seller to collect and remit tax on sales made in that state.

A G R O W I N G L I S T

NEXUS-CREATING ACTIVITIES

Affiliates

Trade shows

Commissions to resellers

Investors / board meetings

Marketing / web advertising

Drop shipments

Multistate locations

Maintenance / service / repairs

Owned / leased real property

Hosted data centers

Field sales / service staff

Licenses / royalties / fees

Direct / online sales

Inventory

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Rates


©Avalara. Confidential and proprietary.

1Nexus

2Product taxability

3Jurisdiction assignment

4 Exemption certificates

6 Audit readiness

5 State and local tax prep and filing

Tax calculations

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SD vs Wayfair

South Dakota asked the U.S. Supreme Court to overturn its long-standing physical presence rule (Quill Corp. v. North Dakota) for determining when a state can make remote sellers collect sales tax.

The Supreme Court ruled in favor of South Dakota on June 21, 2018.

South Dakota is granted authority to impose sales tax obligations on out-of-state transactions.


What was South Dakota vs. Wayfair, Inc. about?

Affected: Remote sellers not currently registered with the state who meet threshold requirements

• Annual sales in excess of $100,000 or 200 transactions into South Dakota

Effective date: November 1, 2018

Most impactful is that the “physical presence” rule has been overturned.


South Dakota vs. Wayfair, Inc. ruling details

If I’m already registered in South Dakota, does this court decision apply to me?

• This ruling will not affect any company already registered and collecting in South Dakota.

Does the ruling only apply to online transactions?

• No. The ruling applies to online and offline sales.

Does the economic nexus rule apply to non-taxable transactions?

• The ruling does not change what is or isn’t taxable.

14©Avalara. Confidential and proprietary.

South Dakota vs. Wayfair, Inc. ruling details

Here’s a look at 2018 by the numbers:

• 42 states adopt economic nexus, requiring out-of-state businesses with a certain amount of economic activity in the state to collect and remit sales tax

• 24 states impose sales tax collection obligations on marketplace providers and sellers

• 5 states establish use tax reporting requirements for non-collecting sellers

• 2 states adopt affiliate or click-through nexus laws for out-of-state sellers



Sales tax laws on remote sellers tripled after U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc.

The post-Wayfair world


The current economic nexus situation

• Effective in 2019 YTD:

• California

• Colorado

• Georgia

• Idaho

• Iowa

• Nebraska

• North Dakota

• Utah

• West Virginia

• Wyoming

• Washington, D.C.

Map as of 8/30/19

Economic Nexus

W H AT I S I T ?

ECONOMIC NEXUS

Economic nexus is a tax collection obligation imposed on sellers based on their level of economic activity within a state.

Unlike physical presence, it is based entirely on sales revenue, transaction volume, or both.

Like most sales tax laws, economic nexus criteria vary by state. All aim to level the playing field between non-collecting out-of-state sellers and brick-and-mortar businesses.

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• When threshold crossed, going forward a corporation should be collecting either taxes or an exemption form.

• For example: “Remote sellers having economic nexus with South Carolina in calendar year 2017, or from January 1, 2018 through August 31, 2018, are responsible for remitting the sales and use tax for all taxable sales made into South Carolina on or after October 1, 2018. These remote sellers must obtain a retail license from the Department by October 1, 2018. Sales and use tax, penalties, and interest will not be assessed against these remote sellers for taxable sales by these remote sellers before October 1, 2018.”


FAQ: When should I start to collect?


What Does This Mean for the Amazon FBA Merchant Seller?

Amazon FBA States

Means state has no sales tax

Marketplace Tax Collection


Marketplace Facilitator legislation is currently in effect in the following states:

STATE EFFECTIVE DATE

Alabama 1/1/2019

Connecticut 12/1/2018

District of Columbia 4/1/2019

Idaho 6/1/2019

Iowa 1/1/2019

Minnesota 10/1/2018

Nebraska 4/1/2019

New Jersey 11/1/2018

Oklahoma 7/1/2018

Pennsylvania 4/1/2018

South Carolina 4/29/2019

South Dakota 3/1/2019

Vermont 6/7/2019

Washington 1/1/2018

“As the marketplace facilitator, Amazon will

now be responsible to calculate, collect, remit, and refund state sales tax on sales sold by third party sellers for transactions destined to states where Marketplace Facilitator and/or Marketplace collection legislation is enacted.

In certain states, local taxes are not included within Marketplace Facilitator Legislation;

Amazon is not responsible for those taxes.”

Marketplace Facilitators


• Registrations• Likely must register once you have a taxing obligation in a jurisdiction

• Registration requirements in each jurisdiction are different, including forms, process and required information

• Filing• More nexus, more returns to file

• Impact on specific business activities, industries, and types of sales:• Drop shippers

• Exempt sellers

• Marketplace facilitators

• Direct sellers


Far-reaching effects of economic nexus

Business impact

Tips to keep up and compliant

Five steps for managing sales tax

©Avalara. Confidential and proprietary.

Step 1: Know where your

business must collect and remit

sales tax

Step 2: Register to collect and remit sales tax

Step 3: Calculate the

correct sales tax amount

Step 4: Track and manage

exempt sales

Step 5: Remit sales to the

tax authority

Avalara Nexus Study Avalara Licensing Avalara AvaTax Avalara CertCapture Avalara Returns

Exemption Certificates

Washington/Florida

AvaTax

AvaTax does not support cash basis accounting - must be accrual

TransactionalData

Returns & Remittance

Rates & Rules

Connector

How AvaTax works - a Tax Engine in the Cloud

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SST

Cooperative of states and local governments to simplify sale and use tax collection and administration.

Simply put – 24 states have found common ground on sales tax:

• Uniform tax definitions

• Simpler exemption administration

• Uniform audit process

• SST Board approves rates, boundaries, and item taxability


What is SST?

SST overview

Members: Arkansas, Georgia, Kansas, Kentucky, Indiana, Iowa, Michigan, Minnesota, Nebraska, New Jersey, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin, Wyoming


Which states are participating?

SST overview

• By registering in the SST program with a CSP like Avalara, your tax compliance process will be streamlined and the cost of compliance can be reduced:


What are the main benefits?

SST overview

Program Benefits Volunteer Status Non-Volunteer status

Free SST registration in 24 states

Single identification number to file and pay taxes in registered states

Uniform filing forms and exemption certificates

Access boundary and rules data

Centralized source of updates and information regarding sales tax rules and regulations

Free certified sales tax calculation software

Free preparation and filing of sales and use tax returns

Free audit Support


What determines your SST status in each participating state?

SST overview

To qualify for Volunteer status in a state, a seller must meet all the following criteria during the 12-

month period immediately preceding the date of registration with the member state or associate

member state:

• No fixed place of business for more than 30 days in the member state or associate member state

• Less than $50,000 of property in the member state or associate member state

• Less than $50,000 of payroll in the member state or associate member state

• Less than 25 percent of total property or total payroll in the member state or associate member state

• Additional considerations may apply to qualify for Volunteer status

Economic nexus and prior registration don’t preclude you from qualifying for Volunteer status!


Multiple solution and services to help get you on track for 2019!

Avalara can help!

Nexus Studies Customized nexus report

State-specific options for how to begin managing sales tax

A clear path forward

Automatic Sales Tax Filing

Fully automated sales tax preparation and filing

Never miss a filing deadline

Works with your sales or accounting platform

Amazon FBA Inventory Report

Registration and Licensing

Zero guesswork with the right forms

Off-load the end-to-end application process

We walk you through every step

Q&A

Matthew HammondNational Sales Manager, Avalara (919) [email protected]

Documents

Matthew Hammond - my-CPE.com · • By registering in the SST program with a CSP like Avalara, your tax compliance process will be streamlined and the cost of compliance can be reduced: