Sales Tax and Reporting Requirement Updates

Sales Tax and Reporting Requirement Updates

 

LUTZ BUSINESS INSIGHTS

 

Sales tax and reporting requirement updates

Stacy watson, tax & consulting shareholder

 

Wayfair Case from 2018

Until 2018, the laws on sales tax stipulated that it was only applicable to companies with a physical presence inside the particular state. Simply put, companies were only required to collect taxes on e-commerce goods sold to another state if they had a physical presence in that state. This precedent was set in the 1992 Supreme Court case of Quill v. North Dakota.

Since then, e-commerce has significantly expanded, and companies are now making many sales beyond the borders of their states. For the company itself, this translates to a lot of revenue for which they do not have to collect sales tax. For consumers, it means that the goods are available at relatively lower prices as compared to items sold by in-state companies that are required to pay tax. And for the traditional business, it has translated to them losing their clients to out-of-state companies that sell more affordable products. 

States were beginning to realize that they were losing out on a high amount of revenue in the form of sales tax by allowing e-commerce businesses to sell within their borders. It is within this context that the South Dakota v. Wayfair 2018 case was decided in the US Supreme Court.

In the matter, it was decided that states could now require out-of-state businesses to collect sales tax on sales into a state, whether or not they have a physical presence in that state. The court also decided that the sales would have to reach a minimum threshold for sales tax collection requirement to apply, to avoid interfering with interstate commerce. Thus, sales within a state below the thresholds are not necessarily subject to sales tax collection by out of state companies.

 

What Companies Should Consider Following the Supreme Court Decision 

Many states are looking to begin applying the Supreme Court decision within their territories, especially because they are bound to generate even more revenue than they did before the Wayfair case. Companies need to review each state’s statutes to ensure you can protect your profits while still following the law to avoid paying penalties.

Here are a few things to consider following the Supreme Court ruling:

First, what do you sell within that state? Depending on the rules applicable, some states do not tax certain goods, whether or not they are sold by a company within their borders. If sales tax does not apply to your products, you may not be required to register within that state.

Next, review how much you sell to a particular state. The Supreme Court decision was careful to point out that sales tax should only apply if the sales surpass a certain threshold, otherwise the taxes would be imposed unfairly and would discourage businesses from operating within that state. For example, you should be making more than 200 transactions within a year, in that specific state.

Also, what are the physical and economic standards within that state? In other words, ensure that there is a nexus between that state and your business, and see whether your company meets the required standards.

 

How to Pay your Sales Tax 

If you check all the boxes above, you need to get registered as a tax payer within that state. You can easily do it online. Be sure to indicate the number of transactions you expect to have, say within 12 months. Depending on the kind of revenue you are bringing in, you will then be advised on whether to file your tax returns annually, quarterly, or monthly. Lastly, review your operations and check if any other registration is required.

Is there software to help a company file sales tax? 

Websites such as tax jar and avalara can provide your company with software to ease the filing process by providing you with all the information you need. On Taxjar, for example, you can file your returns by following a few simple steps. The software also sends you payment reminders and helps you avoid late payment penalties. In addition, you can obtain tax reports for the different jurisdictions in which your business is located.

Ensure that the responsible party in your company for sales tax has all this information well in advance. And finally, if your company had filed tax returns in the past, be aware that you may now be required to file for other taxes.

Paying taxes is a duty that all businesses need to fulfill, and you should not be left behind. Make sure that your company is in full compliance with sales tax laws in every state you operate within. It is crucial that you to look into all the above issues and make all necessary adjustments when filing your taxes.

Lutz can help you ensure that your company complies with all the applicable state regulations. If you are looking to learn more about sales tax and reporting requirements, or if you have any questions, please contact us today.

ABOUT THE AUTHOR

Stacy Watson

402.827.2048

swatson@lutz.us

STACY WATSON + TAX & CONSULTING SHAREHOLDER

Stacy Watson is a Tax and Consulting Shareholder at Lutz with over 20 years of experience in taxation. She has in-depth experience in providing state and local, income, franchise, sales, use and escheat taxes.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, Creighton University, Omaha, NE
COMMUNITY SERVICE
  • Junior Achievement Heartland Family Services, Past Member
  • St. Stephen the Martyr, Various Boards

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Toll-Free: 866.577.0780  |  Privacy Policy

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OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

What’s New With Wayfair? + Sales and Use Tax Update

What’s New With Wayfair? + Sales and Use Tax Update

 

LUTZ BUSINESS INSIGHTS

 

WHAT’S NEW WITH WAYFAIR? + SALES AND USE TAX UPDATE

With 7,500 different tax jurisdictions in the United States alone, it’s easy to understand why our sales & use tax laws are considered among the most complicated in the world. In this presentation, Stacy Watson and Lindsay Rouse discuss sales tax collection and reporting requirements, as well as cover the changes in 2019.

 

RECENT POSTS

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Sales Tax Registration 101

Sales Tax Registration 101

 

LUTZ BUSINESS INSIGHTS

 

sales tax registration 101

Stacy watson, tax & consulting shareholder

 

Starting a business can be easy. Knowing how to make sure that you are in compliance with state and federal laws is a little more difficult. You probably already know that you need to register to collect sales tax in your state when you set up shop, but what may be less clear is that you could have to file for sales tax in other states as well. This blog will help you understand when you should register for sales tax and how to do it.

What is Nexus?

Nexus is a word that means “connection.” In the world of sales tax, nexus means a connection between your company and a state. The word implies that your business has a connection with a particular state and, therefore, needs to collect state sales tax on any goods sold there. That means that if your company has a physical presence in the state, such as where you employ people or where you store inventory, you would have nexus. This includes the state where your business is located, but it may also include other states. For example, Amazon collects state sales tax in its home state as well as the states where it has warehouses or distribution centers.

Nexus also includes economic nexus under the new Supreme Court ruling in Wayfair  If a state has adopted the economic nexus standards of $100,000 in sales or 200 transactions in to a state in a 12 month period, the company may have economic nexus.

About Sales Tax Nexus

That might all seem straightforward – but wait!

Technically, you should start collecting state sales tax the first time you make a sale in that state. However, you should not collect sales tax without first registering. It is actually illegal to do so and you could face a fine if you charge state sales tax without first registering your business in that state.

DO NOT try to file in every state and just collect sales tax as a matter of course. When you file your sales tax registration, you automatically create nexus in that state. Now, you will have to keep collecting sales tax in that state as long as you are in business AND you will have to file returns for each of those states. So, only file for sales tax registration in states where you actually have nexus, otherwise you will be wasting your time and money.

Registering for Sales Tax

Before you register your company to collect sales tax, review the state’s requirements for registration:

What is the nexus standard for the state?

Different states have different definitions which may include physical as well as economic parameters.

Does the company meet the requirements of the nexus standard?

Next, look at whether your company meets those standards. You may not have to file in all the states where you think you should.

Are the products or services you provide taxable under the state statute?

Pay attention to which products and services you provide too. Some are not taxable by certain states.

If the sales items are not taxable, does your company have a Use Tax liability?

Also, remember that you could be subject to Use Tax. This is a special tax you would have to pay if you bought something in a different state that your company will use in the state where it is located, you may have to pay sales tax on that item.

Deciding to Register for Sales Tax

Once your company has nexus and decides to register, you will need to keep a few things in mind:

  1. Most states allow online registration;
  2. Depending on the amount of tax to be collected, your company may be able to file annually, quarterly or monthly; and,
  3. After sales tax registration, your company should review your operations to see if any other state registrations are required such as secretary of state, income tax, unemployment.

 

In a nutshell, there are a few things you need to know about sales tax registration:

  • Companies can be required to pay sales tax to a state even if they don’t collect it but should have collected the tax.
  • You can file a sales tax registration in any state, but you may not need to register in every state.
  • Collecting sales tax in every state is unnecessary for many companies.
  • You need to register for sales tax in any state where you have nexus.

Overall, registering for sales tax can be confusing. If you need help determining nexus or figuring out which registrations your company needs, contact us today. We can go through your books and help you complete all of your required registrations.

ABOUT THE AUTHOR

Stacy Watson

402.827.2048

swatson@lutz.us

STACY WATSON + TAX & CONSULTING SHAREHOLDER

Stacy Watson is a Tax and Consulting Shareholder at Lutz with over 20 years of experience in taxation. She has in-depth experience in providing state and local, income, franchise, sales, use and escheat taxes.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, Creighton University, Omaha, NE
COMMUNITY SERVICE
  • Junior Achievement Heartland Family Services, Past Member
  • St. Stephen the Martyr, Various Boards

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

State Income Tax for Businesses and Individuals

State Income Tax for Businesses and Individuals

 

LUTZ BUSINESS INSIGHTS

 

state income tax for businesses and individuals

Attendees will learn about state income tax issues relevant to Nebraska based businesses and their owners. This presentation, led by Russ Smith, includes a discussion of business income tax topics such as nexus, apportionment, composite filings, and nonresident withholding. Individual income tax topics include resident vs non-resident filings, the Nebraska Capital Gains Exclusion, and Nebraska’s treatment of income earned by S Corporations and LLC’s.

 

RECENT POSTS

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Changes in Nebraska Sales Tax Laws

Changes in Nebraska Sales Tax Laws

 

LUTZ BUSINESS INSIGHTS

 

CHANGES IN NEBRASKA SALES TAX LAWS

Do you have questions about sales and use tax laws? You’re not alone. With 7,500 different tax jurisdictions in the United States alone, it’s easy to understand why our sales & use tax laws are considered among the most complicated in the world. Please join us for a presentation led by Stacy Watson for a discussion on Nebraska sales tax and audit risk and how it may affect your organization.

 

RECENT POSTS

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

How Changes in Nebraska Sales Tax Laws May Affect You and Your Business

How Changes in Nebraska Sales Tax Laws May Affect You and Your Business

 

LUTZ BUSINESS INSIGHTS

 

How Changes in Nebraska Sales Tax Laws May Affect You and Your Business

STACY WATSON, TAX & CONSULTING SHAREHOLDER
The rise of mobile technology and advances in digital capabilities has created a thriving e-commerce marketplace. This has made it possible for companies of every size to build relationships with buyers nationwide. Historically, state sales tax laws only impacted businesses with a physical presence in that state. However, a new decision by the US Supreme Court is expected to prompt changes in Nebraska sales tax laws that will affect any organization selling to Nebraska residents.  

The Court Decisions That Shaped Tax Regulations

Until recently, the standard for state sales tax collection was shaped by the precedent-setting 1992 US Supreme Court decision in Quill v. North Dakota. In brief, the decision prevented states from collecting sales tax on purchases made through e-commerce, unless the company selling the products had a physical presence in the state. The logic for this decision was based on the Dormant Commerce Clause, which interprets the US Constitution as prohibiting any interference in interstate commerce by individual states unless expressly authorized by Congress. Of course, at the time of this decision, e-commerce was in its infancy. For perspective, the first commercial sales website launched that year, and Amazon didn’t come along until 1995. E-commerce has grown exponentially since 1992. In 2017, more than 10 percent of US retail sales were made online, and that figure is expected to grow by 15 percent each year. For decades, traditional brick-and-mortar businesses have complained that out-of-state e-commerce companies had an unfair competitive advantage, and states protested the loss of tax revenue from these transactions. The 2018 US Supreme Court decision in South Dakota v. Wayfair overturned the Quill v. North Dakota decision, and e-commerce companies are scrambling to adjust. The new ruling permits states to charge sales tax, regardless of a company’s physical presence in that state.  

The Impact for Companies Doing Business in Nebraska

The South Dakota v. Wayfair case was only concerned with whether companies must have a physical presence in the state to be charged sales tax, so the nuances of individual state tax laws have not yet been tested. However, there are some important takeaways. For example, it appears that e-commerce companies will only be liable for state sales tax if they exceed a certain transaction threshold. As a result, businesses that only sell in a state occasionally will not be impacted. Once the dust has settled and states have passed appropriate legislation in response to this new development, e-commerce companies should consider the following points before offering goods for sales in each state:
  • What do I sell?
  • How much do I sell to a state?
  • Who are my customers?
  • Risk vs Reward
With this information, you can make business decisions that protect your bottom line profits – and you can be sure you stay on the right side of the law, so you don’t face heavy fines. Nebraska is one of the states that has not yet created a legislative response to this decision. While the state did attempt to pass a bill establishing tax for e-commerce sales in the most recent legislative session, it was unsuccessful. Now that the South Dakota v. Wayfair decision has been announced, there is a sense of urgency for getting a law passed in the next session. By some estimates, the additional taxes could add anywhere from $30 million to $40 million to Nebraska’s revenue.  The Nebraska Department of Revenue has taken a position that a law change is not necessary and they will begin enforcement on January 1. 2019. There is still a long list of questions on how these policy changes will be applied, and both states and businesses are hoping for answers over the next few months. In the meantime, if you do any volume of business in Nebraska, keep a close watch on legislative developments to ensure you are fully prepared to comply with relevant regulations.

ABOUT THE AUTHOR

Stacy Watson

402.827.2048

swatson@lutz.us

STACY WATSON + TAX & CONSULTING SHAREHOLDER

Stacy Watson is a Tax and Consulting Shareholder at Lutz with over 20 years of experience in taxation. She has in-depth experience in providing state and local, income, franchise, sales, use and escheat taxes.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, Creighton University, Omaha, NE
COMMUNITY SERVICE
  • Junior Achievement Heartland Family Services, Past Member
  • St. Stephen the Martyr, Various Boards

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850