US Sellers: South Dakota vs. Wayfair (Sales/Use Tax for States)

Calibrick

Hi folks! Unsure if ya'll are keeping an eye on this, but I found a site (https://www.avalara.com/us/en/learn/sales-tax/south-dakota-wayfair.html) that lays out each state, is kept current, and has all the latest info including legal status of collection, etc.

The toughest state so far seems to be Minnesota - 100 unique sales to that state and you have to report/collect their sales tax. Of course, how to ANTICIPATE 100 sales to a specific state, ensuring you collect the tax in the first place, is a whole other ball of wax. The other states seem to be following in South Dakota's stead and targeting 200 unique sales. My own state hasn't finalized anything yet (California) for folks selling to here (unless you're located in CA, in which case you've been collecting/reporting CA all along if you're running legally).

I'm still waiting for someone to square this federally, which would make a heckuva lot more sense (one of the areas where federal law can actually help small businesses like ours!). Has anyone heard anything or is this still one giant some states maybe/no/yes/pondering/each with different rules situation?

Sandy

Geert Middelman

For me after moving to the US a few months ago, this whole sales tax thing has been a major puzzle. I do charge for my own state, based on zip code (which is also not 100% accurate on town/county). On top of this I keep track of the amount of orders sold to a particular state. Every order received I enter into Quickbooks including the address, which makes it easy to report based on state. Right now I decided to simply block buyers (I'm really sorry....) from states where I am about to cross the threshold, and look into setting up a sales tax nexus in that state next year. The problem is that I can have 100 orders for Minnesota, or 200 orders for another state, but with an average order value of 20 dollars, it is barely worth it to set up sales tax nexus in each state. You either have to cross the order amount by a lot, or stay well below it. Hovering around that 100/200 with low value orders will be a challenge. And switching from no nexus to a nexus middle of the year is magic to me. Do I have to file taxes retrospectively on the <100 orders? Does the filing start at that 100? So many questions...

Calibrick

I've been doing more research on this... California (starting 4/19) posted some good instructions. At least their expectations are once you HIT the count threshold, that is the point you start collecting and reporting, e.g., the next order AFTER your 200th (so you may have to collect report say October-December if you broke the threshold in early October). Then you have to assume the next full year to collect.

But I've been lucky, my counts are not that high yet for ANY state (100 is the lowest I could find), I'm hoping I end up not having to worry about this. Then again, I only operated April-December in 2018.

For California, way more confusing, they want us (our own state sellers) to start collecting district taxes if we hit more than 200 orders in a district in addition to the state taxes. Today, you only collect district tax for the district you reside/work in, and state tax only for the rest of the state.

I totally agree though, we love to make stuff confusing and harder than it needs to be, sigh.

Graham

@Calibrick

Odd thing is that regulating interstate commerce IS constitutionally a function entrusted to the federal government!

Love to see how Minnesota state gov is going to go after a seller 2000 miles away for “failure to report” ?

Calibrick

@graham, totally agree! One of the few cases it would be helpful if the Federal government stepped in. I expect them to at some point, but who knows when that'll be...