One year post-Wayfair: Where do states stand on economic nexus?

0
22

It’s hard to believe that it’s been over a year since the Supreme Court ruled online sales are taxable in the highly watched case South Dakota v. Wayfair.

Chances are, your A/P and A/R departments are still reeling from the massive change and trying to keep up with all the state laws that followed in the Court’s wake.

That hasn’t been an easy feat by any means. Many states quickly jumped to create their own complicated rules and add strict enforcement dates. Some states acted a little too fast and then backtracked on their requirements, causing even more confusion for your finance staffers, vendors and customers.

In short, it’s been a whirlwind. Take a look at where states stand now, so you can be sure your staffers are both applying and paying the correct sales tax for online purchases.

The current numbers

As of now, 42 states have enacted economic nexus legislation to require remote sellers you work with to add sales tax to your company’s purchases.

Of the eight states that haven’t passed laws, five states (Arkansas, Delaware, Montana, New Hampshire and Oregon) don’t have state-level sales tax. Therefore, don’t expect them to make any big moves soon.

The three remaining states that haven’t added economic nexus laws (Florida, Kansas and Missouri) all proposed legislation that didn’t come to pass while they were in session. Remind your finance staffers that these are three states they should have on their radar in the coming months.

2 major trends to watch

Though most states already have economic nexus laws on the books, they aren’t done acting just yet. Some are making additional changes to either spur more sales tax revenue, or simplify things for sellers and consumers. Here are two trends your finance staffers should be aware of:

1. Sales tax collection requirements for marketplace facilitators. States first imposed sales tax collection on remote sellers (i.e., your normal out-of-state trading partners). Then, they turned their heads to third parties and marketplace facilitators, like Amazon and eBay.

Now, the vast majority of states have also added sales tax collection laws for marketplace facilitators, and it’s likely those who haven’t will add them soon.

2. States changing their thresholds. Post-Wayfair, each state was able to set its own threshold for sales tax collection. Most states added both a total sales threshold (X dollars in sales per year) and a number of transactions threshold (X separate transactions per year).

But now, many states are changing or removing certain thresholds. For example, New York recently raised one of its thresholds from $300,000 to $500,000, while Connecticut lowered one of its thresholds from $250,000 to $100,000. And other states, like Washington and North Dakota, have eliminated one of their thresholds completely.

Tell your finance staffers to keep an eye on changing thresholds too, so they can make sure not one dime of company money is misspent.