Wandering The Woods Of Other Tax Jurisdictions – A Post-Wayfair Cautionary Tale
Do you have any fears about expanding into other state taxing jurisdictions? If so, don’t be alarmed! There are a lot of complicated rules and regulations that business owners may not know about but should. That’s why we brought our State and Local Tax team together to help you conquer your fears and navigate unknown tax jurisdictions safely while identifying any weak spots in your business operations.
Rea & Associates presented a free informative webinar for our clients, prospects and business owners. Below you will have access to the recording. As well as other helpful state and local tax resources.
This special webinar, which originally took place Nov. 13, 2018, shines some light on the latest in state and local tax from the recent Wayfair ruling to real-life horror stories.
Attendees learned more about:
- What unknown threats can hurt you and your business.
- How to stay compliant and the consequences if you don’t.
- Steps to take immediately and those that can be implemented over time.
Questions & Answers
Q: Why are we responsible for policing our vendors and potentially penalized?
A: Sales tax is a compliance issue for vendors (sellers of things). Use tax is a compliance issue for buyers (users of things). You don’t have to police your vendors and their sales tax obligations, but you do have to manage your own use tax obligations.
Q: Does my company need to be concerned about selling online with our own website?
A: Yes. Now any sale, from any source, can give you nexus if you are over the state threshold.
Q: In a situation with an out-of-state remittance address, would it be legal if an out-of-state auditor determined sales tax needed to be paid in their state while also having tax due in Ohio? Would that be double taxation for the same transaction?
A: Yes, that can happen. That is where you need a CPA firm to advocate on your behalf. It’s all too easy for state tax auditors to put you in a bind.
Q: I’m Ohio-based and hire an out-of-state vendor to service my out-of-state client, whose corporation is also in Ohio. The vendor from out of state bills my company for the service. Does this qualify as a “reseller” event for me, or do I have to pay the out-of-state sales tax?
A: It depends. What does the invoicing say? Anytime you are billing a client, all of that money potentially needs to have sales tax applied to it. If you don’t invoice something to anyone, then you probably don’t need to worry about that.
Q: We service office equipment. One of our clients is in Florida. We don’t bill the company in Florida, we bill the corporation in Ohio. What do we need to do?
A: It doesn’t matter who you are billing. The source, the site of the sale is where the stuff is going to. That is the state that can tax the transaction, regardless of the location where the bill is sent.
Q: How does geofencing impact nexus in other states than Ohio?
A: States source sales of TPP to where they are going. As a rule, services go to where the benefit is received. Geofencing, if it actually corresponds to these, would be helpful for that. Otherwise it’s not going to do much for you.
Q: What are the 10 states covered by nexus? What are the thresholds for sales to those states?
A: Every state has nexus rules. Many have Wayfair-style nexus rules. We offer nexus studies where we can go over your presence and sales in other states and determine where you have nexus. A google search will also provide you with a lot of this data if you’d like to do that kind of project yourself!
Q: So are the first $99,999 of sales or first 199 transaction tax exempt? Are you charged the out-of-state tax after you reach the threshold?
A: No, they would all be taxable. If you anticipate exceeding the threshold, don’t wait, register immediately.
Q: Is a food manufacturer selling to distributors required to collect exemption certificates?
A: Yes. As a vendor, you should always either collect sales tax or an exemption certificate for the state to which the sale is sourced. Every time.
Q: How do you think the law will end up regarding exempt versus non-exempt sales taxes? Our company does 99 percent of our business to wholesalers, so they are exempt sales. I worry about the 1 percent that we sell directly to end users. Any idea if and how soon this will be figured out?
A: Hard to say! As a vendor, you should always collect tax or exemption certificates.
Q: What if sales are just under the requirement, but sales tax has been collected because you are not sure you’ll meet the threshold? I assume you just send it.
A: You can do that if you want to (though your customers may not like it and take action accordingly). You have to register in that state and then, yes, you file a return and send the money.
Q: Where / how do you send the taxes you collect?
A: You register in that state and file a return.
Q: Why are major sites like bhphoto.com not collecting sales tax? Just risking it? Waiting for clarification? Can you wait for clarification?
A: That is their business model, and it is no longer a safe model. This should change unless they are just living dangerously.
Q: Income tax issues don’t affect corporations, correct? What I mean is, individuals working for a corporation would not be subject to these state sales taxes?
A: No, there are corporate income taxes in many places. W-2 employees that work over a certain number of days in a state must file and pay tax there. Their company must register and file payroll taxes there.
Q: Does the Wayfair ruling go into effect in 2019 or now?
A: A mix. Some states are holding enforcement till 2019, while others are doing it now.
Q: Is shipping state or purchasing state the determining factor in getting tax collected (ship to or bill to)?
A: It depends on the type of tax.
Q: We need a national sales tax that is the same for all states and then divvied up by sales to the states with all funds sent to one location, annually.
A: That would be nice! Our friends across the pond and to the north have a system like that. I happen to prefer it, and it sounds like so do you!
Q: If a manufactured product is picked up in Ohio by a vendor and transported across state line for consumption enjoyment, is this sale in state or out of state for taxation purposes?
A: Sales of TPP usually sourced to the place where customer gains possession, wherever that is!
articles & insight
Supreme Court Issues South Dakota vs. Wayfair Decision – The U.S. Supreme Court has sided with South Dakota, ruling that physical presence, of any sort, is no longer required to register with a state tax department or collect their sales tax. What does this ruling mean to you?
Podcast | extreme nexus: south dakota v. wayfair – Joe Popp joins unsuitable to discuss the South Dakota v. Wayfair case and what the Court’s decision means for business’ state and local taxes.
Online Sales Get Complicated – In the United States, sales taxes are governed on a state-by-state basis, which means that each state plays by its own rules when it comes to tax rates, how sales are sourced, and even the definitions. Needless to say, managing these various laws can get tricky. Read on to learn more.
For questions about this webinar, call Becca Davis at 614.923.6552 or email firstname.lastname@example.org.