How the Change in US Sales Tax Rules has Impacted International Sellers
By Chris Vignone, Prager Metis International LLC
On 21 June 2018, the US Supreme Court passed a landmark decision that transformed the landscape of sales tax in the US. The South Dakota vs Wayfair decision effectively permitted states to create new rules for salestax collection requirements based on the dollar or transactions amount of sales – otherwise known as economic nexus. Previously, companies were only required to collect sales tax based on a physical presence test. Over the past year, thousands of US companies have had to grapple with this new requirement.
However, US companies are not alone. The implications of Wayfair are being felt around the globe, and many international companies are faced with diffcult decisions on if, when, or how they should comply.
In general, prior to Wayfair, international companies with no US physical presence were not required to collect sales tax. Now, any company with sales to an individual state that exceeds the general standard of USD 100,000 or 200 transactions in the current or prior year, will be required to collect and remit sales tax. If companies do not comply, heavy interest and penalties may occur, and sales tax is also considered a trustee tax in the US, making offcers and owners of the company personally liable for any under-collection.
Although technology has eased the burden with many online solutions for collecting and remitting sales tax available, it will not negate the requirement to register in up to 46 states and many more localities. These new rules will affect all industries, including wholesale, retail, e-commerce, and digital goods.
The first step a company should take is to complete an economic nexus evaluation report. This report will evaluate sales by state for the current and prior year to determine which states require compliance. Finally, companies need to monitor the rules of each state for changes that will affect their business.
Chris VignoneGGI member firm
Prager Metis International LLC
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
Basking Ridge (NJ), Coral Gables (FL), El Segundo (CA), McLean (VA), New York (NY), White Plains (NY), Woodbury (NY), USA
T: +1 212 643 0099
Prager Metis International LLC is a top accounting firm providing a full range of accounting, audit, tax, and advisory services to domestic and international clientele in a wide range of industries. With 17 offices worldwide, they have a level of expertise and a unique global presence that makes their clients’ world worth more.
Chris Vignone is a Principal in the Advisory Services department of Prager Metis. He also leads the firm’s State and Local Tax Group and is an expert in sales-and-use tax and tax credits and incentives.
Published: Indirect Taxes Newsletter, No. 09 Autumn 2019 l Photo: 安琦 王 - stock.adobe.com