As we close in on April 15, taxes are high on most peoples’ minds, but businesses have been thinking about sales taxes—and how they’ll be affected—for a long time.
As you might recall, 2018 was the year the Supreme Court of the United States overruled the physical presence rule that for decades kept states from taxing remote sales. The court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018) allows states to now require a remote seller with “economic and virtual contacts” in the state (economic nexus) to collect and remit sales tax, even if it has no physical presence in the state.This is huge, and it will take months (if not years) for the full ramifications of the decision to play out. One way to ensure you are ready for these changes is to integrate Avalara with your accounting software.
The Cost of Wayfair
As of the end of 2018, more than 30 states and Washington, D.C. have adopted economic nexus policies, including major players California and Texas. Fallout from the Wayfair decision is sure to continue far into this year. Several states have already filed economic nexus legislation for consideration in 2019, including Arkansas, Missouri, and Virginia. Meanwhile, sales tax simplification measures are under consideration in Texas, which has more than 1,500 local taxing jurisdictions.
Although the Wayfair case was triggered by an economic nexus law, the decision doesn’t prevent states from pursuing remote sales tax revenue via different routes; all it does is put an end to the physical presence rule. Thus, states could pursue a variety of remote seller sales tax laws in 2019, including affiliate nexus, click-through nexus, or cookie or software nexus.
With these changes, more states will likely require marketplace facilitators to collect and remit sales tax on behalf of their third-party sellers. If your business sells through multiple channels, you might still be figuring out what that means for you far into this year.
This rapid growth of economic nexus and other remote seller sales tax laws could potentially inspire Congress to take up the issue. It would never agree to expand state tax authority to remote sales, but it might come together to limit it. A handful of bills seeking to do just that have already been introduced.
Not Done Yet: Sales Tax is More than Just Remote Sales
States’ newfound freedom to tax remote sales isn’t the only sales tax news that made headlines. These additional changes are also now in play this year:
More states apply economic nexus to other taxes. Texas is already looking at how economic nexus affects franchise tax. Other states will likely move in that direction.
More taxes on streaming services. As more people cut cable to stream their entertainment, more states will look to tax those services.
More taxes on sins. Some states will change the way they tax products like alcohol and tobacco; others could start to tax recently legalized products such as marijuana.
More product taxability changes. In 2019, more states may exempt certain products like tampons because they’re essential. Others may subject products like soda to a higher rate because they pose a health risk. And some states may exempt newer products and services simply because they’ve never been taxed before.
Rate changes: There are sure to be many.
Be Certain in Your Taxes with PositiveVision
As they say, the only certainties in life are death and taxes. You’re likely facing more than a comfortable share of uncertainties with the new sales tax laws. But with the right accounting software—and partner—in place, those changes could be much easier to bear. PositiveVision is on a mission to help SMBs find the right business software to maintain and grow their profitability through easy software solutions. With a focus on accounting software, ERP, business intelligence (BI), and warehouse management systems, we can make sure your processes—especially those sales tax processes! —are streamlined, so you remain productive, competitive, and above all, profitable. Contact us now for a complimentary consultation and see how accounting software can help you manage the new sales tax changes of 2019 and beyond.