Post Wayfair Aftershocks: Top 10 Sales and Use Tax Changes – Part 1

A Look Back – Nexus in 2018

The year 2018 was a banner year for major law and administrative changes in sales and use tax compliance for businesses. The Supreme Court in Wayfair v South Dakota on June 21, 2018, for the first time in over 30 years, expanded the reach of states across the country to impose sales and use tax obligations on retail businesses (so-called nexus).  It did so by expanding nexus beyond physical presence to include economic presence (economic nexus), i.e., businesses that meet certain minimum threshold amounts in both amount of sales and/or number of transactions in a state.

More Changes to Come in 2019

At latest count, 36 states and DC, with New York the latest, have adopted economic nexus with various start-collection dates. It is expected that by the end of 2019 most, if not all of the remaining states will have such laws.  This means that businesses across the country in 2019 may have various sales and use tax obligations in many more states than ever before. Obligations include to register, to keep records, as well as to collect and remit sales and use taxes in many states in which they do not have a physical presence.  These challenges will affect businesses, not only in the retail online and brick-and-mortar sector, but in other sectors up and down the supply chain, including wholesale, manufacturing and construction.

Coming up in our Top 10 Blog Series

In my last blog, we sounded a general alert to businesses of the increasing compliance risk resulting from the expanding jurisdictional reach of states under economic nexus.   Over the next several weeks, we are going to take a much deeper dive into what we consider the top ten changes increasing compliance risk in 2019 for businesses and tax practitioners who advise businesses on sales and use tax matters.

Here are our top ten:

  1. Audits. Businesses can expect increasing numbers and greater frequency of sales and use tax audits.
  2. Uniformity. Businesses can expect the states to make a greater effort to make its rates and rules more uniform across the country.
  3. Address Validation. Address validation will be even more important to businesses in the post-Wayfair world.
  4. Nexus. What will be the fate of alternative nexus laws, e.g., click-thru nexus on the books before Wayfair?
  5. Foreign Sellers. It is expected that foreign sellers into US markets will experience increased state sales tax compliance burdens in 2019.
  6. Emerging Technologies. How will all of the emerging technologies affect tax compliance and planning in general and specifically for indirect tax?
  7. Increase Registration. Increased Registration under economic nexus rules will increase the risk of prior year liability and the ability to take advantage of Voluntary Disclosure Agreements (VDA) and various state amnesty relief programs.
  8. Taxation of Services. The number of services that will be taxable (including cloud-based services such as SaaS) are expected to increase.
  9. Exemption Certificates. Non retail businesses, e.g. manufacturing, will have increased registration and exemption certificate management requirements in 2019.
  10. Cannabis. As more states continue to legalize medical and recreational cannabis/marijuana in 2019, existing and new cannabis businesses will have to improve their legacy cash management solutions, as well as their inadequate tax and accounting competencies.
Stay up to date with all of the nexus standards across the country.

Visit the Wolters Kluwer | Sales Tax Nexus resource page to stay current with rapidly changing nexus standards across the country.

AUTHOR

Jerome Nestor

Jerome Nestor, Esq., CPA, MBA-Accounting Information Systems Manager Tax & Accounting North America Wolters Kluwer Mobile: +1 847.312.5671 Email: jerry.nestor@wolterskluwer.com

All stories by: Jerome Nestor

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