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Is Wayfair Leveling the Retail Playing Field?

Balance-Spheres-Circles_GI-876632832-BW-MDIs the 2018 Wayfair ruling achieving its goal of leveling the playing field among sellers?

In the competitive world of eCommerce, the difference between getting the sale and losing it can easily come down to sales tax. If your competitor doesn’t charge sales tax, you face a disadvantage.

Get a complete list of states with economic nexus requirements:

Cherry Bekaert's Nexus ChartsWhat can be done when one eCommerce seller is collecting sales tax and another is not? Some sellers may “turn in” another seller to the state because they suspect their competitor should be charging sales tax. In most cases, the compliant seller simply tolerates the discrepancy until the competitor becomes sales tax compliant.

Some states are trying to solve the problem of an uneven playing field among internet retailers by targeting sellers that they suspect are not compliant. Recently, several sellers received letters from states, such as Iowa, where they do not have a physical presence. The letters informed the retailers that they may have met economic nexus thresholds, and explains the rules for compliance.

Other states are enforcing stiff penalties. Nebraska, one of the most assertive states, passed a law with steep penalties for any company that is not upholding their legal obligation to collect and remit sales tax. The Nebraska law (NE-004.09) states that the revenue department can fine company officers up to $500.00 per day if their company is not registered with the state.

States are not the only taxing authorities looking for non-compliant remote sellers. In some states, such as Colorado and Alabama, where cities and counties administer their own sales taxes, remote sellers are getting letters from counties and towns explaining their sales tax compliance requirements. For example, the city of Mt. Butte, CO, recently notified eCommerce sellers that they need to collect and remit sales tax in that district even though the sellers do not have physical presence and the locality has not passed an economic nexus law.

Get tips on how to address your new sales tax obligations since the Wayfair ruling by reading this article:

What’s Your Strategic Plan to Manage Post-Wayfair Sales Tax Obligations?

It seems that both states and other localities are getting more aggressive and will not rest until they get as many sellers as possible to become sales tax compliant. How the states find these sellers is uncertain. One method is reviewing lists available on the internet showing top sellers. States also cross reference other tax types. For example, if sellers are registered for state withholding tax or corporate income tax, states will check for sales and use tax registrations. The states also have agents “shopping” third-party marketplaces to determine if sellers are collecting sales tax. The agents actually add items to their carts and check for sales tax.

The Supreme Court’s decision in Wayfair attempts to level the playing field among all sellers. Most sellers want to do the right thing, but the road to compliance is perceived as being too complicated and too costly. If states want more sellers to meet their new sales tax obligations, simplifying the process may be the first step.

In the meantime, if you want to learn more about sales tax compliance services, visit our website

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Tiffany Rodi
Written by Tiffany Rodi
Tiffany manages Cherry Bekaert's sales and use tax services for eCommerce sellers. She works directly with clients to make sure state sales tax registrations are completed in a timely and efficient manner. She also helps eCommerce sellers with nexus reviews and taxability issues.

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