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Wayfair’s Impact on Small Business

March 11, 2019 by Colleen Netzell
Audit & Accounting, Copeland Buhl, Tax Services

There is a buzz around Sales Tax due to last summer’s Wayfair Supreme Court decision.  This decision changed a long-standing rule requiring a physical presence in a state before a business had to collect sales tax.  Physical presence in no longer a requirement.  States are taking advantage of this change and requiring more businesses to collect sales tax.  Generally, these requirements are at least $100,000 of sales or 200 transactions in a year.   Unfortunately, failure to comply could cost your business uncollected tax, penalties and interest; not to mention an audit.

You are mostly likely to be impacted if you sell from your own website.   While the new rules under the Wayfair decision do not apply to transactions prior to October 1, 2018; once you register in state, they have your name and number.  They may start looking at your past activities to determine if you should have collected sales tax under the old rules. 

Here are some things you can do to turn down the noise:

  • Rank your potential problems by analyzing your sales by state for the prior year. Are you over the thresholds of $100,000 in sales or 200 transactions? How much of these sales are taxable sales?
  • Get the statute running by filing a Sales and Use Tax return in every state you have an employee, inventory or other property.
  • Be ready when the Auditor comes knocking, have your exemption certificates ready and archived by state.
  • Plan for automation by standardizing the process for collecting and reporting sales tax. Review your current process to minimize the judgement calls.
  • Review your past activities in each state under the old rules. Did you go to a tradeshow? Did you visit a customer to fix a product or provide training?  You may want to limit your exposure by filing Voluntary Disclosure Agreements.

The change from the Wayfair decision can be overwhelming for a business.  Whether it be analyzing your sales tax exposure in a specific state, helping you upgrade your processes or filing anonymous voluntary disclosures agreements; Copeland Buhl can help by providing practical solutions.

Please contact us at (952) 476-7100 with any questions you have.

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