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Tag Archive for economic nexus

Important Updates About Wayfair Legislation In 2021

Important Updates About Wayfair Legislation In 2021

After the landmark decision in South Dakota v. Wayfair (2018), states across the nation rushed to implement Wayfair-related legislation. For most states, this meant implementing economic nexus and/or marketplace facilitation laws to better capitalize on the sales tax opportunities presented by online retail.

While it’s taken some states longer than others, 2021 could be the year that every state with a general sales tax finally implements Wayfair-related legislation.

It’s also important to note that states that already have Wayfair-related legislation are still making tweaks and refining their laws to best suit their economic needs.

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SALT Alert: Florida Adopts Economic Nexus Rules For Sales And Use Taxes

SALT Alert: Florida Adopts Economic Nexus Rules For Sales And Use Taxes

On April 8, 2021, the Florida legislature passed economic nexus and marketplace facilitator legislation, which the governor has indicated that he will sign the bill into law. Florida’s economic nexus law becomes effective July 1, 2021. If you are selling to customers in Florida, then you must be aware of the new nexus standards in Florida.

Highlights of the law are as follows:

  • The threshold of economic nexus will be $100,000 of sales during the previous calendar year (with 2020 as the initial threshold year).  The law DOES NOT adopt a transaction threshold.
  • The law applies to sales made after July 1, 2021. However, to determine whether a seller has met the threshold on July 1, 2021, the seller’s non-marketplace sales during 2020 are compared against the $100,000 threshold.
  • Sales made through and taxed by a Marketplace Provider do not count towards the $100,000 economic nexus threshold and should not be reported as sales by the remote seller.
  • A “Marketplace Provider” is subject to the sales tax collection and remittance requirements imposed on dealers in Florida.
  • A Marketplace Provider is defined:

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The Second Sales Tax Mistake Businesses Made In 2020: Economic Nexus (Part 2 of 3)

The Second Sales Tax Mistake Businesses Made In 2020: Economic Nexus (Part 2 of 3)

The COVID-19 pandemic has been and will be remembered as one of the most impactful global events of our era. An unprecedented challenge was thrust upon the medical, government, and business community that will clearly change many of the behaviors of our society in the long run.

As businesses worked quickly to adapt, one of the last issues many of them considered was compliance with state and local sales tax.

In Part 1 of this article, we talked about how remote workers can create sales tax collection obligations for businesses through traditional nexus. In Part 2, we discuss the impact of economic nexus due to growth in internet and remote sales.

Mistake #2 – If your remote employees didn’t create nexus, your remote sales boost / pivot did

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Frequently Asked Questions: Sales And Use Taxes Economic Nexus And Wayfair (Part 2)

SALES AND USE TAXES ECONOMIC NEXUS AND WAYFAIR

PART 2:  IF A TAXPAYER MEETS THE SALES THRESHOLD IN A STATE, WHAT MUST WE DO NOW?

These frequently asked questions build on our prior series of FAQs.

Q:  Once a taxpayer meets the sales threshold of a state, what must be done to be compliant with the state’s tax laws?

A:  You must register for sales and use taxes with the state.  Depending on the state and jurisdiction, you may need to register with the local jurisdiction or parish.  Please note some states may require you to register with the state’s Secretary of State before obtaining a sales tax permit from the state.

Q:  How often will I need to file sales and use tax returns? 

A:  It will depend on each state.  The state will assign you a filing frequency based on certain criteria it has established.  The frequency will be either monthly, quarterly or yearly.

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What You Need To Know About Long-Term Impacts Of The Pandemic On Online Retailers

What You Need To Know About Long-Term Impacts Of The Pandemic On Online Retailers

In the last 10 months, much of daily life has been turned upside down. Large events have been canceled, schools have switched to distance learning and many workplaces are still depending on remote setups for employees.

One of the many other consequences of the pandemic is the temporary closure of in-person retailers. Between this and understandable safety concerns, many consumers have turned to online shopping as their default.

This has offered many retailers the lifeline they needed to stay afloat during the pandemic, but it’s also creating problems for those that were unprepared for the complex tax burdens associated with online retail.

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Nexus: What Do You Need To Know And How Does It Relate To State Tax?

MONIKA MILES - NEXUS

In the state tax world, one of the most important concepts is “nexus.” Also known as “taxable presence, “nexus” is the term that describes the minimum connection a company needs to have with a state in order to be subject to the state’s taxing scheme. This includes sales tax, income tax, gross receipts tax and more.

There’s a lot that goes into the discussion around nexus, and with the recent state tax law changes, there are frequent updates. This post is a helpful start to understanding what nexus is and how it affects your business.

How Does Physical Presence Nexus Establish State Tax Exposure?

One primary way companies establish nexus is through having a physical presence in that state. For example, if a business has “boots on the ground” in terms of employees or third-party contractors working in the state, or has inventory, other personal property or real property in the state, the company likely has nexus and needs to collect and remit state tax.

When it comes to physical presence nexus, there are a few specific areas we look at:

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Economic Nexus In Wake Of The Wayfair Decision

Monika Miles On Economic Nexus

In the United States, the sales tax landscape has drastically changed following the June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. In this landmark decision, the high court ruled that it was constitutional for South Dakota to enact an economic nexus law. While this may seem like old news, we are still receiving queries every single day about economic nexus and how it impacts our clients.

As a result of the Supreme Court’s decision, over the last year, most of the states which impose a state-level sales tax have jumped on the economic nexus bandwagon and have enacted “Wayfair” types of laws. States are eager to collect sales tax (as well as other types of taxes) and, in theory, want to make it easier for companies to pay their taxes. In addition to physical presence, if companies create economic nexus in a state, that requires them to collect and remit sales tax and also file sales tax returns, provided the state has enacted an economic nexus statute, which again, most of them have at this point!

What Is Economic Nexus?

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Economic Nexus Versus Cookie Nexus: What You Need To Know

Monika Miles - Economic Nexus Versus Cookie Nexus

Although the precedent for economic nexus was set in June 2018, states were attempting to come up with ways to collect and remit sales tax from online transactions long before the Wayfair case made it to the courts.

Massachusetts and Ohio, for example, decided to define the computer code from internet cookies as a tangible item that could establish a physical presence nexus. However, once Wayfair passed, was this “cookie nexus” still in effect? The answer is, “Yes.” However, as always, regulations are still more complicated and confusing.

Massachusetts’ Cookie And Economic Nexus Rules

As Avalara explains:

  • Massachusetts’ economic nexus provisions require remote sellers to collect and remit state sales tax if the sales are greater than $100,000 in the current or previous calendar year. However, if you make sales of less than $100,000 into the state, you fall under a small seller exception and don’t need to worry about sales tax.
  • The cookie nexus required companies with more than $500,000 in internet sales and more than 100 transactions to collect and remit sales tax, if the company placed “cookie” onto the computers of MA customers. If your business falls under these thresholds, the provisions don’t apply to you.

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Update On Economic Nexus Around The Country

Monika Miles

Economic nexus continues to be a hot topic in the sales tax world. Since the U.S. Supreme Court Case of South Dakota v. Wayfair (June 2018), almost all states have enacted economic nexus laws as they want their share of revenue from businesses selling to customers in their state. In this week’s blog, we’ll take a look at Kansas and their struggle to get an economic nexus law on their books as well as an update on other states that have economic nexus laws.

Reminder- What is Economic Nexus?

In the past, companies needed to have physical presence, or “boots on the ground,” in a state in order to have nexus (or taxable presence) in a state. This meant that a company needed to have offices, inventory, employees, or contractors in a state for a certain amount of time. Companies now don’t necessarily need to have physical presence in a state in order to create nexus; they now can have nexus in a state by virtue of economic nexus. Economic nexus means that companies need to have sales of a certain dollar amount or needs to have a certain number of transactions within a state. Some states require both criteria.

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How Does Economic Nexus Apply To More Than Just Sales Tax?

Monika Miles

Last year’s Wayfair v. South Dakota decision changed the way states define nexus for sales tax purposes. In the past, a business needed to establish physical presence, but the Supreme Court’s decision set precedent for states to establish economic nexus parameters, thereby mandating a certain percentage of sales made within the state are subject to sales tax.

However, it’s important to note that economic nexus doesn’t only affect sales tax. If your company conducts a certain amount of business within the state, it may also be responsible for collecting and remitting all applicable taxes, not just sales tax.

AccountingWeb does a terrific job explaining the following ways states and cities are applying economic nexus to their jurisdiction. Note that some are not necessarily new, but more states ARE considering economic nexus in areas beyond sales tax. Here’s a quick summary to get you started.

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Economic Nexus And Exempt Sales?

Monika Miles And Nexus

If you’re an avid reader of our blog, you know that economic nexus is the hot topic when it comes to determining if a company has created taxable presence in a state. Since the Supreme Court’s decision in South Dakota v. Wayfair Inc. in June 2018, we’ve been helping clients to make sense of this  somewhat confusing concept.  While physical presence nexus (employees, inventory, office space) in a state is also still in play and creates a filing requirement, companies find themselves tripping into nexus much more quickly now because of the sales and transaction thresholds of economic nexus legislation, which varies from state to state.

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Economic Nexus In Wake Of Wayfair Decision

Monika Miles - Economic Nexus In Wake Of Wayfair Decision

In the United States, the sales tax landscape is drastically changing due to the recent U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. In a previous blog, we talked about how the High Court made a landmark decision in June of 2018 that makes it easier for companies to create nexus in states. It ruled in its monumental decision, that it is constitutional for the State of South Dakota to enact an economic nexus law.

As a result, more states are jumping on the economic nexus bandwagon and enacting economic nexus laws too. States are eager to collect sales tax and, in theory, want to make it easier for companies to pay their taxes. In addition to physical presence, if companies also have economic nexus in a state, that qualifies them to pay sales tax to the state, provided the state has enacted an economic nexus statue.

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