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Level 7

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Did everyone see the Supreme Court ruling today on internet sales?

They sided with the big box retailers. 

 

Quickbooks may have to expand the item limit of 14,500 to handle all the new sales tax items we will have to create if we sell out of our domicile state. You don’t need to have a physical presence in the state to collect sales tax. 

 

Its really going to hurt small businesses.

32 Comments
Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Not just that.

 

If you sell out of state, now you are also responsible to get a sales tax permit, file sales tax reports even if there is a no tax due, and of course remit any sales tax collected, for each state per their schedule.

 

And that is true, even if like Amazon, amazon collects and remits sales tax for you.

 

Nexus, is a dead word in the sales tax arena.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Rustler and @Raywhite28, do you think many small businesses are going to pull out of space like amazon so they don't have to do the heavy lifting of complex tax tracking? Do these platforms offer a way to collect that kind of data at present? Radical change for the online landscape or just complicating business as usual? 

 

Highlighted
Level 3

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Granted, I'm not an account nor a tax lawyer, but I have a thought or more of a question.  

 

Are there loopholes and business practices that can be taken advantage of for taxing and shipping purchases?  Such as using a local company as a 3rd party to handle the shipping of a product you sell?

 

Example:  Instead of having to track sales tax for EVERY state and locality, you use a 3rd party as your shipper.  Your business is located in AZ.  John Smith in CA buys your product but you actually hand the item off to your shipper who is located in your same town or at least same state.  They handle the shipping of the item to CA.  Is there a way using a method like that to avoid having to collect sales tax from every customer from the state they reside in?

Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks


@DesertMarshall wrote:

Granted, I'm not an account nor a tax lawyer, but I have a thought or more of a question.  

 

Are there loopholes and business practices that can be taken advantage of for taxing and shipping purchases?  Such as using a local company as a 3rd party to handle the shipping of a product you sell?

 

Example:  Instead of having to track sales tax for EVERY state and locality, you use a 3rd party as your shipper.  Your business is located in AZ.  John Smith in CA buys your product but you actually hand the item off to your shipper who is located in your same town or at least same state.  They handle the shipping of the item to CA.  Is there a way using a method like that to avoid having to collect sales tax from every customer from the state they reside in?


 

No, the shipper is just acting as your agent, you made the sale you are responsible for sales tax.

 

And unless you are selling from your own web site, the marketplaces are going to report your sales by state now.

Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks


@Anonymous wrote:

do you think many small businesses are going to pull out of space like amazon so they don't have to do the heavy lifting of complex tax tracking? Do these platforms offer a way to collect that kind of data at present? Radical change for the online landscape or just complicating business as usual? 

 


When I was doing background on that sales tax op ed thing I did.

 

There are states right now that have statutes on the books that say  that out of state sellers are required to collect, report and remit sales tax on any sale to that states residents.  Those statutes have been tied up in lower courts, and I think when this Wayfair case went to the supreme court, the cases were tabled waiting for a ruling - now with the ruling I expect them to be dismissed.

 

What  I did find though when I came across those state statutes, was that some of the states had a floor - sell less than this amount, and no sales tax reporting is required.  The issue is that is not consistent state to state presently - hopefully they will get together and set a common reporting floor.  Doubtful though.

 

But some of them, there is always a but, did have the requirement to report sales below that floor, while not remitting - how that would work I can not imagine since you must have collected sales tax if you sell via one of the major marketplaces like amazon.

 

Keep in mind, amazon, ebay, etsy, et al WILL report sales to the states, and will add that sales tax to your sale, so part of the deposit you receive will be sales tax due to some other state.  Except of course for the states they have an agreement with to collect and remit.

 

What a mess this is going to be.  It can be tracked in desktop, difficult but doable

impossible in QBO without auto sales tax, and of course with auto sales tax too.

 

If intuit thinks they paid a lot when the IRS got them for false returns using turbo tax (lack of internet security by the way), this is going to be worse.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Rustler what about a case where the office is in one state but the distribution point/warehouse (not 3rd party) for said office is the next state over. The location of the sale is the office and not the distribution point? 

Highlighted
Level 7

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Sales tax is charged based on destination not origin.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Raywhite28, what about drop-shipping everything to Oregon, and then reshipping it after it was "received" by an intermediary?

Level 7

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Since you didn’t sell it to the intermediary, Oregon is out of the picture unless it’s final destination is in Oregon. That’s how I understand the law but each state can & do have different sales tax law.

 

Example - Clothing in NY is taxable in NJ it is not.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Raywhite28, I guess I might be stretching this further than is possible/logical (and no one should think of doing this, pay your taxes folks), but what if a X intermediary company in Oregon decided to be the recipient for all sales for Z company. The payment was processed by the buyer but was sent to X intermediary company as the final destination with their name on the receipt (like you would for a gift to a friend). Company Z continues to use intermediary X to ship all of their products as a final destination. Company X then sends the package (no charge, not a sale) to the original buyer, a process which is now outside the original purchase?

Again, no one do anything like this, but for the sake of discussion...

Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

That is what started all this, amazon has various warehouses in different states, your inventory is held there - the state then said that is nexus for you, even though it is an amazon warehouse.  

 

I am sure there is going to be a lot of "get around this" information on the net, the question is ... will you take the chance, is it worth it

 

New law is simple to understand - you will collect sales tax based on destination if it is out side your state, inside your state then your state rules apply.

 

As this leaks down to the little guy, a couple of years away I think (not counting what the major marketplaces do) sales from your own web site will start to comply too.  It is going to be easy for states to find you, almost no one anymore sends or takes a check in the mail, and all that computer data is there for the asking.

 

 open a tab, enter this in the url
myactivity.google.com

 

and in another tab log into facebook

go to facebook.com/settings

at the very bottom download your activity

 

That is the  easy stuff, You wouldn't believe what the alphabet agencies have.

 

Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks


@Raywhite28 wrote:

Sales tax is charged based on destination not origin.


Depends on the state for sales within the state, ten states are origin based, with CA as a hybrid of both origin and destination.

 

This new interstate sales tax will be destination based.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Rustler, the alphabet folks are across the street, I can believe it. 

Highlighted
Community Champion

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

While, I know this really does not contribute nor help... it needs to be said

 

I HATE SALES TAX! I HATE TRACKING IT AND I HATE REPORTING IT! 

 

The amount of liability that we take on as accountants to report this information for our clients is insane.  

 

I know that there are applications like Avalara, which do a great job and help simplify this daunting task, but as a value based service provider, I cannot charge enough for it to be worth taking on sales tax.

 

Sorry if it sounds a little negative, but I will bet there are plenty of Accountants on here who agree with me.... Are there??

Highlighted
Level 15

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@ParkwayInc

 

One of the reasons I do not take on clients, though I have been asked many times, is the liability issue. I asked some time ago of all the consultants over on the L&S community how many carried liability insurance to cover any law suits. The silence was deafening, most never thought of it. When I checked the cost, that helped me decide, no clients. (think doctors and malpractice ins)


When TX had destination based sales tax it was a nightmare in desktop. I used sales tax groups and that helped but since sales tax groups has a bug (12 years old that I know of personally) that also causes problems. And sales tax reporting in desktop is inadequate too, it is ludicrous in QBO. Now with the auto sales tax, sales tax reporting is a total unknown - you can not even see the data driving the report. And of course when they ported over the code from desktop to QBO they included the sales tax group bug, renamed to combined sales tax in QBO.

 

Thank god destination sales tax is gone from TX.

 

And yes, intuit is aware of the sales tax group bug, their solution, manually make an adjustment as needed


Desktop sales tax reporting is just wrong by the way. In a test file, set up an other charge item for a deposit and link it to a current liability account, set it to non tax. Sell that item on a sales receipt for a large sum. Run your sales tax liability report for this month - see that deposit sitting in non taxable sales? One of many issues in sales tax reporting

Highlighted
Level 2

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

No doubt this new ruling will create complex business changes that will take some time to sort out. There's just so many questions as to how this will affect online sellers. Will there be an amnesty? How will you register? Will you register prospectively, historically or with a VDA? How do you plan on filing all these returns? What about all the new statutes, rules or regulations that are sure to come?

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Level 2

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

This is true. But I wouldn't be so quick to jump the gun just yet. eBay and other eCommerce sites are still fighting for the small business people. Our company went to the hill to lobby against the sales tax bill being passed even though we knew it was ineveitable. 

 

But I do know that if you file for a sales tax permit in any state that it helps you if you are a reseller. But it hurts you as well. Because by law you are now set up and required to collect sales tax in that same state. So it something to think over before rushing into.

 

We are a small business and this was not good news for us. We are hoping that the government will drag it's feet on this. But it looks like it will be a short 2-4 years before it's implemented. I do hope they work out something fair for the small business owner. Or you are right, we all might as well be on the Titanic. I am trying to remain hopeful and positive while doing due diligince.

Highlighted
Level 2

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

From what I read, when and if the new sales tax law is implemented, even if you drop ship from another state, you will be required to charge sales tax.

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Itsreconciled1, do we have any idea about how long the roll-out will before the law goes into effect? Sounds like an opportunity to help businesses make the transition. 

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@gbratsblondie, thank you for sharing your first-hand experience. It will be very valuable to other small business owners here in the community.

 

I foresee a further complication: cases where sales tax is accidentally collected twice, once by the business now responsible for collecting and again by the 3rd party seller, all because there's some minor miscommunication along the line.

 

Let's hope our folks on the hill will be quick to help reverse those inevitable mistakes...

Highlighted
Community Champion

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@Anonymous the obvious solution is a huge uptick in population for Delaware or other states without sales tax. Say you live in PA but have a vacation home in Delaware where you have everything shipped tax free. If you consume it all while on vacation there is no downside - but if you transport the non-taxed goods home with you they are then subject to use tax since PA is the use destination.

 

We have had a similar situation forever with illegal transport of alcohol and tobacco from low tax states to high tax states - it being even against PA law to buy a six-pack or bottle of wine in NY and bring it back to PA where liquor taxes are higher

Highlighted
Anonymous
Not applicable

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

@john-pero, I foresee the population of DE growing dramatically in the next few years (good time to buy real-estate? :) ). 

 

Is this also now going to demand a legal definition of "vacation"? 

 

I first experienced the PA law when I was visiting from NY - I didn't realize it was due to taxes. 

 

 

Highlighted
Level 2

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Not in all states.
Highlighted
Level 2

How the New Supreme Court Ruling on Sales Tax for Internet Sales May Affect QuickBooks

Minnesota just passed a law requiring all remote sellers to collect sales or use tax if selling in MN.   But, they do have a small seller exception which does not require remote sellers to collect sales tax until their sales during a period of 12 consecutive months total either:

       • 100 or more retail sales shipped to Minnesota
       • 10 or more retail sales shipped to Minnesota that total more than $100,000

 Also,  for Amazon sellers, they collect and remit sales tax right now for WA, PA and one other state, but the seller has to collect for other states they currently have nexus in.   

 

Some states are origin bases, some destination based.

 

Very complex and it's only going to get worse.     Good opportunity for Intuit and Avalara to shine by coming up with an easier solution.

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