Changes to State Sales Tax: What Retailers Need to Know

The rise of e-commerce has reaped substantial benefits for consumers and has shifted the dynamic for online businesses looking to accelerate their growth. This year’s Holiday e-commerce sales are pacing for nearly 15% growth year-over-year, totaling a projected $124 billion according to Adobe.

But this year, the dynamic is now changing for some, more specifically as it relates to state sales tax.

If you are a digital or offline retailer, you have likely heard about the June 2018 Supreme Court ruling that over overturned the Quill v. North Dakota sales tax collection precedent.  This precedent established that companies without a physical presence in a state – i.e. online retailers – were not required to collect sales tax on sales delivered to customers in that state.

Now that it has been overturned, your organization may be liable for sales tax in all fifty states.

Who It Effects:

Multi-state digital and direct mail companies.

Why It’s Important:

Quill v. North Dakota was originally contested to eliminate, for large internet companies, the competitive advantage of not having to charge sales tax. However, this ruling affects all organizations. Consequently, remote sellers may now be pursued for back sales taxes, required to start collecting taxes with limited notice, or compelled to report the names of customers who have purchased from them. If your company is not easily able to pay for software programs that can handle the complexity of the diverse state tax collection and reporting laws around the country, we recommend taking action now.

Why You Should Care:

This new precedent may unfairly penalize smaller mail order companies and digital startups. Larger companies, like Amazon and Overstock, are positioned to more easily absorb the cost of this requirement, while smaller companies and startups may find they can no longer compete.

What Else Has Happened? New Changes in Massachusetts:

Since the overturned decision of Quill v. North Dakota, a surprising new tax twist has come from the state of Massachusetts – one that adds an additional level of complexity to the already thorny issue of state tax collection.

The Massachusetts Department of Revenue adopted new rules in October of 2017, based on the argument that software and tracking codes on computers and phones constitute a physical presence.  While most state adopted tax-collection rules post the Quill v. North Dakota decision, Massachusetts is pursuing a retroactive tax collection back to October 1, 2017. The change impacts digital and direct mail companies with more than 100 transactions and $500,000 in sales annually in Massachusetts.

What You Can Do:

Contact your members of Congress and urge them to enact a national law that would limit the confusion caused by the Supreme Court ruling.

  • Follow this link, customize one of the templates that the ACMA has provided and send it on to your state senators and representatives.
  • No idea how to contact your representatives? Click here
  • Not sure who your senators are? Click here

Let’s work together to advocate for coherent state tax collection policy for all remote multi-state sellers.

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