Mike Fleming spent more than eight years at accounting firm Peisner Johnson & Co. LLC helping retailers and other companies navigate a labyrinth of state and local sales tax issues.
He assisted merchants dealing with a range of issues—from registrations and business licenses to then-critical questions such as whether working with affiliates that generate sales on their behalf meant they had a physical presence, or nexus, in the state or local tax jurisdiction that would require them to collect and remit sales tax on online orders generated in the area.
Then in April 2018, he set out on his own. After working for a large company for a number of years, he was ready for something new. He expected to hire three or four people to staff his consulting business, called Sales Tax & More, which would focus on helping merchants avoid or limit audits. But his plans abruptly changed on June 21 when the U.S. Supreme Court announced its decision in South Dakota v. Wayfair Inc. The ruling stated that, for the first time, states and local governments could require online retailers to collect sales tax even if they don’t have a physical presence in the tax jurisdiction. The news drove a wave of merchants to Sales Tax & More and Fleming realized that he’d have to quickly ramp up hiring to keep up with demand; a little more than a year after launching, his consultancy had 18 employees.
“We were doing well in our first few months,” Fleming says. “Then Wayfair came down and it was like drinking from a firehose. I’ve had a lot of long days and sleepless nights trying to keep up with all the developments.”
That’s because in a little less than a year since the Wayfair decision, the already-Byzantine area of sales tax and compliance issues has grown vastly more complicated. As of late-May, 42 states had nexus laws or regulations in place that require out-of-state retailers to collect and remit sales tax on online sales and 26 states had passed so-called marketplace facilitator laws that require online marketplaces to collect and remit sales tax on behalf of marketplace sellers. And there’s little uniformity across the various states’ laws. For example, while a marketplace operator has to collect and remit online sales tax on behalf of sellers once it generated $10,000 in revenue from consumers in Washington in the previous calendar year, that same operator doesn’t need to do so until its in-state revenue reaches $500,000 in California-based sales during the current or previous calendar year.
That’s not to mention the seemingly infinite number of differences among the various states’ laws as to what items are taxable. A retailer has to collect and remit sales tax on all apparel items in Illinois, for example, while it doesn’t in Pennsylvania—unless the item is formal attire, an item made with real, imitation or synthetic fur, or sporting goods and clothing that’s “normally worn or used when engaged in sports.” With so many complications, retailers are turning to consultants like Sales Tax & More and sales tax automation vendors to help them make sense of, and comply with the various laws and requirements.
“Gosh darn, we’ve had a large amount of work to do,” says Mike Clem, chief digital officer and senior vice president at Fort Wayne, Indiana-based Sweetwater Sound, reflecting on the current tax landscape. “We’ve had to figure out how sales tax works for our B2B buyers, our direct-to-consumer buyers, as well as for churches and schools, which are tax-exempt. And determining where and when we have to collect sales tax…
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