This week’s episode of “Future-Proof” is a little different. Instead of talking about what’s going to happen tomorrow, we’re talking about something pretty important that’s happening today: South Dakota v. Wayfair, the U.S. Supreme Court decision that clears the way for out-of-state retailers to collect sales taxes from customers, even if they have no physical presence in the state.
There’s still a lot of uncertainty about how the ramifications of this decision, and about when and how states will begin implementing the new sales taxes. A number of state tax groups – including the Multistate Tax Commission, the Federation of Tax Administrators, and the Streamlined Sales and Use Tax Governing Board – are holding meetings this summer in an effort to clarify the ruling, and folks representing the retail industry are pushing for the creation of a workgroup that can inject some uniformity in how the ruling is regulated.
In the meantime, though, the world of sales tax is getting a whole lot more complicated.
So we sat down to talk with Scott Peterson, vice president of U.S. tax policy and government relations at Avalara, a company that makes software that provides automated tax compliance. (And in the interest of transparency, Avalara is a strategic partner of the Maryland Association of CPAs and the Business Learning Institute.)
This is important stuff for every industry, really, and it proves our previous “Future-Proof” guest, futurist Daniel Burrus, correct: Regulation and legislation is a hard trend that isn’t going away.
In this conversation, we cover:
- Nexus: What is it?
- The impact this ruling is going to have generally and the impact it will have on the accounting and finance professional specifically.
- What CPAs should be telling their clients to help them prepare .
- Why many small companies likely won’t be impacted at all.
- How this ruling will affect consumers
Beyond online sales tax
Coverage of the Supreme Court’s ruling has been focusing mainly on the online retail world and the fact that states can now tax online purchases.
But Peterson says the ruling goes well beyond that. This is a sales issue, and anybody who makes sales across state lines needs to think about whether or not this law applies to them.
If, for instance, you sell online or offline in any of these states – Alabama, Connecticut, Georgia, Hawaii, Iowa, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maine, Mississippi, North Dakota, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Washington, or Wyoming – you will probably want to sit down with a CPA who advises on state and local tax issues. And if you work in SALT yourself, prepare to be busy. By this time next year, every state will likely have made their own laws or regulations about Nexus, too.
Want to learn more about Wayfair?
Karen Syrylo, a member of the MACPA’s Board of Directors, wrote a thorough analysis of both the majority and dissenting opinions in a recent blog post.
Avalara has compiled a helpful series of charts, graphics, and other resources explaining exactly when the new rules will be in effect, the thresholds for triggering a collection obligation, and what transactions are included in the threshold test – all broken down by state. You can find those resources here.
And the folks at Aon have released a new report that warns CPAs to “understand the professional liability implications of this decision” — and there are many.