Do Wayfair Laws Need Reform To Reduce The Burden On Retailers?

Wayfair Laws

If you’re at all involved in the tax world, whether on the accounting side or as a business owner, you should be well aware of the 2018 Wayfair ruling at this point.

For an in-depth overview of South Dakota v. Wayfair (2018) and its impact on states and re tailers alike, please click here.

As a result of the Supreme Court’s decision in that case, almost every state with a general sales tax has implemented what many in the business refer to as ‘Wayfair Laws.’ More specifically, the ruling opened the door for economic nexus and marketplace facilitation legislation to be implemented across the country.

Now, nearly three years after the decision was rendered , the effects of these Wayfair laws are coming to a head and many groups are calling for reform to reduce the burden on online retailers.

Where The Complexity Comes From

When it comes to economic nexus and marketplace facilitation, it’s not the laws themselves that cause problems, it’s that each state has its own regulations and they can differ wildly across the nation.

Beyond the inherent complications of differing tax rates and the sheer number of state and local sales tax jurisdictions, additional complexity can be found in the application of Wayfair laws. In most states, economic nexus is only triggered when the out-of-state retailer meets a certain threshold for sales, the number of transactions on an annual basis, or a combination of both. The same can be said for marketplace facilitation regulations. However, these thresholds are set by each state separately and the components of how they are measured can vary (i.e.; gross sales vs. taxable sales)..

And all this complication is before we even get into differing procedures for sales tax audits and varying requirements for submitting tax returns.

All said, small- or medium-sized companies that lack large accounting departments, the resources to hire a vendor or the budget to purchase software to manage Wayfair-related tax obligations, are suddenly finding themselves in a rather sticky situation.

Addressing The Burdens On Online Retailers

To reduce the burden on smaller online retailers, there have been recent calls for a uniformity in online sales tax legislation across the country. Similar ideas have seen previous success, including through the Streamlined Sales and Use Tax Agreement (SSUTA).

While the agreement proved popular in certain circles, only 23 state have adopted it since its implementation, limiting its effectiveness in regards to the Wayfair situation.

Instead, many retailers and concerned parties are looking for federal action. However, any action by the federal government will be slow going and, in the meantime, retailers are struggling to deal with the burden that Wayfair laws have created.

To keep ahead of tax obligations and ensure compliance, the only option for these retailers have is to stay proactive and informed when it comes to Wayfair laws and their application. This is especially hard when these laws continue to change as states refine legislation to best suit their needs.

Do You Need Help Dealing With Wayfair Laws?

Three years out from the Supreme Court’s ruling in Wayfair, we still have discussions with clients every day (yes, truly, every day) about how the rules work and how they impact the clients’ businesses.  So, of course, we are at the ground level to see how these rules have impacted companies of all sizes. The important thing, from our perspective, is to address these issues early.  And make sure you understand any exposure that might be out there relative to retroactive non-compliance.  We can assist with identifying and mitigating sales tax exposure risk – we do it, literally, every day! (So you’re in good company.)

Have a question? contact Monika Miles And Team.

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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