Economic Nexus Sparks Need for Speedy Sales Tax Registration

By Sabrina Zimara | October 12, 2018

Before the Supreme Court of the United States issued its ruling in South Dakota v. Wayfair, Inc. (June 21. 2018), states could only tax sales by businesses with a physical presence in the state. Wayfair changed that long-standing rule. The court found the respondents’ “economic and virtual contacts” with South Dakota to be a sufficient basis for a tax collection obligation (nexus).

For economic nexus, a business establishes an obligation to collect and remit sales and use tax by its economic activity in a state. Generally, states look at the volume of sales or the number of transactions during a particular time frame, usually (but not always) the current or preceding calendar year. In South Dakota, the threshold is gross sales of $100,000 or 200 or more transactions in the state.

Already enforced in fourteen states, the economic nexus will soon be in effect in 27 states and counting. Businesses making sales into multiple states need to be on their toes, ready to register and commence collection activities as soon as the nexus is triggered.

Unfortunately, determining when economic nexus has been established in a state is complicated by the fact that there’s little uniformity between jurisdictions. And once established, the process for getting things rolling (i.e., registering to do business) varies from state to state.

Economic nexus laws vary by state

While the thresholds in the majority of economic nexus states are $100,000 or 200 transactions, that’s not the case in all states: In Georgia, it’s $250,000 or 200 transactions, in Minnesota, it’s 10 or more sales totaling more than $100,000 or 100 retail sales, and so on.

Furthermore, the threshold in some states is based on tangible personal property only, while in others it includes services and in some, it includes electronically transferred property. The threshold is comprised of taxable and exempt sales in some states but only taxable sales in others. To top it off, some states simply haven’t said.

Once nexus has been established, businesses may need to act fast.

Economic nexus can be established overnight

Consider Illinois, where economic nexus went into effect on October 1, 2018. Remote sellers must ascertain at the end of each quarter whether they’ve met one of the state’s economic nexus thresholds during the preceding 12-month period. If they have, they’re required to register and commence tax collection and remittance at the start of the subsequent quarter — which could be the next day.

The Illinois Department of Revenue provides the following example: At the end of March 2019, a remote seller determines it made $200,000 in sales to Illinois purchasers for the preceding 12-month period. As a result, it’s required to register to collect and remit tax on sales to Illinois purchasers from April 1, 2019, through March 31, 2020. On March 31, 2020, the cycle starts again.

A seller with unexpectedly strong sales in Illinois at the end of a quarter could find itself with an unexpected obligation to collect and remit tax in a matter of days.

Learn More

Stoneridge Software hosted Avalara for a webinar on November 8. Check out the recording of the webinar for even more information.

 

Repost from Avalara

Related Posts

Recommended Reading:

5.27.22 Dynamics GP

How to Run Drop Ship Sales in Dynamics GP

Need to Invoice the Customer before you get the invoice from the vendor? This The freight forwarder has contacted you […]

Read the Article

New Features in Dynamics 365 Business Central 2022 Wave 1 Release – Protecting G/L Accounts From Being Deleted

There are a lot of exciting New Features in Dynamics 365 Business Central 2022 Wave 1 Release to get excited […]

Read the Article
5.25.22 Financials

Rounding Numbers in Power Automate

  If you’ve ever tried to round numbers in Power Automate, you have probably already run into the issue there […]

Read the Article

Manage U.S. Use Tax on Purchase Orders in Dynamics 365 Finance and Operations

  Managing sales tax requirements on your business purchase can be complicated, but Dynamics 365 Finance and Operations can help […]

Read the Article
5.19.22 Dynamics CRM

How to Write a Great Support Ticket in the Stoneridge Support Portal

Submitting a support ticket through the Stoneridge Support Portal is a quick and effective way to get assistance for any […]

Read the Article

Managing Your Business Through Uncertain Times Using Dynamics 365 Finance and Operations

  Dynamics 365 Finance and Operations (F&O) can help you make informed decisions on how to move your business forward. […]

Read the Article
5.13.22 Power Platform

Using Power BI Object Level Security

  The following article will demonstrate how to use Power BI Object Level Security to disable column data based on […]

Read the Article
5.12.22 Dynamics CRM

How to Use the Stoneridge Support Portal

Stoneridge Software’s support portal is an intuitive and useful function that makes it easy for you to access resources to […]

Read the Article
5.6.22 Dynamics GP

Dynamics GP Transaction Removal: Purchase Orders

  Are you having performance issues with Purchase Orders?  Do you find that there are old Purchase Orders on your […]

Read the Article

Start the Conversation

It’s our mission to help clients win. We’d love to talk to you about the right business solutions to help you achieve your goals.

Subscribe To Our Blog

Sign up to get periodic updates on the latest posts.

Thank you for subscribing!

X