Wayfair Decision – Beyond Just Retail

Non-retailer Companies Take Heed: Wayfair Is Not Just About Remote Retailers

Retailers, especially remote ecommerce retailers, are rightfully getting most of the attention these days on the Supreme Court’s recent decision in Wayfair to throw out physical presence in a particular state as a constitutional requirement for allowing states to impose sales tax collection and remittance obligations on vendors selling into that state.

However, the Wayfair decision will also have a significant effect on nonretailers, e.g., manufacturers and wholesalers, which should not be overlooked by practitioners and software providers alike.  See for example, a recent blog by Stephen P. Kranz, a partner at Washington, D.C., law firm McDermott Will & Emery LLP [What the Supreme Court Ruling Means for Online B2B Sellers]

Among the challenges that Wayfair brings to nonretailers, two issues jump out immediately:

  • Sales Tax Exemptions management
  • Reporting requirements under Economic Presence Nexus Laws

Sales Tax Exemptions

In his article, Kranz notes that many companies have wholesale as well as retail operations and need to confirm their ability to manage tax-exemption certificates provided by business customers as well as process tax on sales made directly to consumers.

“It would be a good use of time now to evaluate where they’re able to meet tax-exemption certificate requirements,” Kranz says, noting that some states, such as Texas and Florida, have strict requirements for registering certificates. Tax exemptions are available to businesses for when they purchase goods that they plan to re-sell. Under typical audits in such states, sellers must be able to show the tax-exempt certificates for any customer that wasn’t charged sales tax.

Unexpected Reporting Requirements

If we use the South Dakota statute as an example, the economic presence test requires a certain threshold volume of revenue or transactions.  Until and unless South Dakota clarifies the meaning of “revenue” for this test, a manufacturer who might not have any tax collection responsibilities because of the resale exemption may still have to file a return if their total revenues in the state exceed the statutory minimums in that state.  Multiply that times 45 states that have their own economic volume minimums and you end up with a new operational and tax compliance challenge.

Conclusion

These are just a few of the many issues that affect not just the “tail end” of a retail transaction but all the pieces in between. Such issues require high levels of content and tools backed by research and technical expertise to handle all the possible combinations and permutations.

CCH SureTax delivers sales tax you can trust.

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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

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