Economic Nexus Since the Wayfair Decision: Frequently Asked Questions About Sales and Use Taxes (Part 2)

The South Dakota v. Wayfair, Inc., decision and economic nexus laws have changed the landscape for taxpayers who sell tangible personal property or provide services that are subject to sales and use taxes. This new landscape has increased the administrative burden on taxpayers and their filing and reporting requirements. 

Weaver’s four-part series of frequently asked questions will help you understand this new sales tax landscape and how it may impact your company. 

Part 2: My Company Meets Sales Tax Thresholds in New States. What Now?

 

Once we meet the sales threshold in a state, what must we do to comply with tax laws?

First, you must register for sales and use tax for the jurisdiction. (Note that, in some areas, you may need to register with both the state and a local jurisdiction such as a county, parish or city.) Some states require that you register with the Secretary of State before a sales and use tax permit will be issued. Once registered, sales tax returns must be timely filed with the jurisdiction.

Looking for a list of state sales tax websites? We recommend https://www.taxadmin.org/state-tax-agencies

How often do I have to file sales and use tax returns?

The state will assign you a filing frequency based on its criteria. The frequency will be monthly, quarterly or yearly.

Do I collect the state rate only, or do I need to include any local rates?

Generally, states require taxpayers subject to the economic nexus laws to collect all applicable taxes, which means all local taxes. Therefore, you would collect the state rate, plus the local rate where you are shipping the goods.   

This is a good resource for looking up current state and local sales tax rates: https://www.salestaxhandbook.com/

If I have zero sales to that state for a given filing period, must I file a sales and use tax return for that period?

Yes.  Once you’ve met the threshold and begin filing, you cannot stop. If your company had no sales in that jurisdiction during the period, you will file what’s known as a “zero return.” If you do not file, you may receive a notice and possible penalties for not timely filing a return.  

I no longer meet a state’s threshold. How long until I can stop filing?

At this time, every state with nexus laws requires that, once you have met a threshold, you continue filing as long as you are in business.

Once I meet a threshold, are my previous sales subject to tax?

Typically, the tax liability is based on future sales after the threshold has been met, not historical sales.

One case in which you would have to file and pay sales tax for historical sales would be finding out that your company passed a threshold but did not register and begin filing tax returns. Depending on how long the company was out of compliance and whether it came forward voluntarily, the state may levy not only back taxes but also interest and penalties.

The Wayfair decision added a huge burden to my staff, and we do not have the people or time to deal with all the issues. Is there a way to make this easier?

Weaver can help. Our clients lean on our experience to guide them through the numerous new state laws, so they can stay on top of requirements that affect them. Weaver’s state and local tax team has been busy providing sales tax compliance services to help companies prevent overpayments or underpayments, while enabling them to reduce their overall cost of compliance. If you would like to discuss your situation and learn how Weaver can help you stay on top of requirements, please schedule a complimentary consultation with our team.

Read more from our “Frequently Asked Questions” series: 

• Part 1: Is My Company Affected by New Economic Nexus Laws?
• Part 3: Sales Tax Compliance Automation Systems and Tools 
• Part 4: Sales Tax Compliance and the Audit