Everyone knows that taxes are not as simple as it appears, and with the recent decision by the Supreme Court, these things have gotten more complex. With the Supreme Court decision on its South Dakota and Wayfair sales tax case, the Supreme Court has overturned the previous ruling that actually determined that the states can collect only sales tax from the businesses having brick-and-mortar places in those states.
So, with the Wayfair ruling, it is said that the distinction will no longer be there, and making business tricker while it comes about the tax time, but there is nothing to fear! Continue reading to know what business retailers have to know about Wayfair’s decision, or what you can do about it.
Retailers online earlier benefited from not having any burden of the tax collection for an individual state, and savings trickled down onto the consumers who saw the lower rates on the goods or services that they bought online. This can likely not be a case for long. Recent court decisions can mean millions of dollars of additional taxes for the retailers, which includes those that sell even digital goods.
How Can My Business Get Affected?
That is the good question, and bad news is there is not an easy answer. The good news is we have a few guidance based on how this Supreme Court’s ruling affects South Dakota. Firstly, this ruling about sales tax deduction won’t be applied retroactively, thus if that was the concern you had, n need to worry at all.
Secondly, Wayfair’s decision doesn’t affect the retailers that just conduct “limited business” at South Dakota. Rules that constitute “limited business” can differ by state, however, in South Dakota, the retailer from any state that reaches to 200 sales in one calendar year or who earns around $100,000 in the gross income from customers of South Dakota may need to pay the sales tax.
What Does It Mean for Other State?
Actually, how Wayfair’s decision can affect your business may depend on laws that your state passes, or unless you stay in South Dakota, we are not very sure what the laws are yet. We know that half (around 23) of all the states are members of Streamlined Sales & Use Tax Agreement, whereas many other states have actually adopted the substantial portions of an agreement that must make this simple to do the business with customers of those states.
We know that you might be needed to send the monthly tax payments or reports based on states where the customers live, however, exact specifics can depend on states in question, for that you need a sales tax calculator.
What Shall I Do About Wayfair Decision?
As Wayfair’s decision can create many new sales tax obligations for the companies (and not only internet sellers), the important things one can do is performing the diagnostic review of the company’s sales or financial process regarding the sales tax.
You will have to assess the current situation as the baseline to decide what the present processes are, people involved, or data and systems used for processing the sales, purchase, or financial transactions that might have the transactional sales tax law consequences. Here is how.
The solid review on sales tax compliance can include examining the organization’s information sources, knowing key contacts (tax, purchasing, order entry, or sales personnel), and key stakeholders. You will need the help of your accounting and tax departments in getting access to the tax returns, general ledgers, financial systems, exemption documentation and sample invoices to complete the analysis.
You also will need the workshops with the process owners from sales, tax, purchasing, billing, or finance to take out pain points or walk through the examples. Make sure you gather documentation—or make it if it does not exist—like current system configuration, data, processes, and more.
- Obtain info about the business activities to get overall knowledge about potential transaction issues or identify any internal control weaknesses.
- Analyze transaction tax management function to decide whether the appropriate amount of the tax will be collected from the customers or remitted on a timely basis to states and if enough of documentation is on the file to support any non-taxable or exempt sales.
- Determine or document tax decision driver’s essential to make tax decisions for organization’s operations.