Small Business Game Changer: Sales Tax Reform Considerations

November 19, 2018 | Article

Have you been paying attention to the sales tax changes and increased compliance obligations as a result of the recent SCOTUS Wayfair decision? With this decision, states are now able to collect sales tax from out-of-state sellers, which means businesses that operate online, send employees to other states and/or have sales in multiple states may have filing obligations.

These filing obligations are determined at the state level, and each state has different thresholds for number of transactions and gross receipt amounts that determine whether or not a business needs to register and then collect and remit sales tax to a given state. Small businesses are often left in the lurch as to how to comply and follow these new rules, when all you really want to do is operate your business.

The following are a few key considerations for small businesses:

  1. Increased Compliance Costs: Because small businesses are required to track their sales in each state and determine whether they meet the given thresholds, small business will probably need to invest both time and dollars in software solutions and consultants to help them ensure compliance, as noted in the following items.
  2. Revenue Sourcing: Small businesses need to consider how they source their revenue for reporting purposes.
  3. Reporting Requirements: As businesses determine they have nexus in additional states, they will also need to:
    1. Be aware of how to get sales tax licenses and consider local municipality/home rule nuances.
    2. Determine the taxability of their current activities. For example, are services taxable in XYZ state?
    3. Identify any deductions and exemption certification issues.

    Sales tax reform is our new reality. Contact your Eide Bailly professional or a member of our State and Local Tax team to learn more.

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