{"id":10707,"date":"2022-08-02T16:22:37","date_gmt":"2022-08-02T16:22:37","guid":{"rendered":"https:\/\/taxops.com\/?p=10707"},"modified":"2022-08-15T20:06:29","modified_gmt":"2022-08-15T20:06:29","slug":"wayfair-opened-floodgates-to-sales-tax-and-a-whole-lot-more","status":"publish","type":"post","link":"https:\/\/taxops.com\/wayfair-opened-floodgates-to-sales-tax-and-a-whole-lot-more\/","title":{"rendered":"Wayfair Opened Floodgates to Sales Tax and a Whole Lot More"},"content":{"rendered":"\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped wp-block-gallery-1 is-layout-flex wp-block-gallery-is-layout-flex\">\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" data-id=\"10714\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-1024x536.png\" alt=\"\" class=\"wp-image-10714 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"536\" data-id=\"10714\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-1024x536.png\" alt=\"\" class=\"wp-image-10714 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><\/noscript><\/figure>\n<\/figure>\n\n\n\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">By the <a href=\"https:\/\/www.saltovation.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">SALTovation Team at TaxOps<\/a><\/p>\n\n\n\n<div style=\"height:42px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><em><em><em>By acting on Wayfair in 2018, the Supreme Court justices acknowledged that the rise of online marketplaces has forever changed the way we do business. How state and local governments collect revenue has forever changed with it<\/em><\/em><\/em>.<\/p><\/blockquote>\n\n\n\n<div style=\"height:45px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">In June of 2018, the U.S. Supreme Court upheld South Dakota&#8217;s economic nexus law in <a href=\"https:\/\/www.supremecourt.gov\/opinions\/17pdf\/17-494_j4el.pdf\"><em>South Dakota v. Wayfair<\/em><\/a><em>, <\/em>which requires out-of-state sellers with more than 200 transactions or $100,000 in sales into the state to collect and remit sales and use tax. This ruling struck down the 1992 decision the Supreme Court provided in <em>Quill v. North Dakota <\/em>that found a state could not require an out-of-state seller to collect sales and use tax unless the seller had a physical presence within the state.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Wayfair decision, however, fell short in defining a clear definition of \u201csubstantial nexus,\u201d giving rise to a wide latitude of rules, rates and requirements as states set their own interpretations. The Supreme Court ruling found that substantial nexus does not require physical presence; and South Dakota&#8217;s economic nexus law qualifies as substantial nexus. That baseline leaves a lot of room for interpretation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">States moved quickly to write and re-write rules defining nexus in ways that compel out-of-state retailers to collect and remit their state and local sales and use taxes, with varying numbers of transactions and dollar amounts triggering nexus, a combination of one or both, wholesale vs retail, the list goes on. Initially, Kansas elected no threshold at all\u2014a single sale into the state triggered sales and use tax obligations. That no threshold rule changed in 2021*. In addition to physical presence, remote sellers must be vigilant about state nexus rules in determining whether\u2014and when\u2014their in-state activities reach the level of substantial nexus.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These changes have sent sellers in search of software solutions to simplify sales tax compliance and minimize the compliance burden going forward. But automation is not enough to ensure compliance. Automation is only part of the answer\u2014a tool in the toolbox\u2014of a necessary state and local tax solution that should include, at a minimum:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Locating nexus and a baseline of sales activities that have or could be creating nexus all along due to continued business activity<\/li><li>Pinpointing taxability of products and services<\/li><li>Quantifying exposure and reducing risk<\/li><li>Managing customer set up, exemptions and procurement of proper documentation to attest to exempt status<\/li><li>Automation<\/li><li>Creating a framework for state and local tax compliance<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">These components together create a comprehensive solution that gives businesses the confidence to move forward without state and local tax issues weighing down strategy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Read more on nexus <a href=\"https:\/\/taxops.com\/what-is-nexus-a-primer\/\" target=\"_blank\" rel=\"noopener\">here<\/a>.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Uneven Enforcement<\/strong><\/h2>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Within a year of Wayfair\u2019s passage, all but two of the 45 states and Washington, D.C. that have statewide sales tax policies had implemented a Wayfair-like law. Five states \u2013 New Hampshire, Oregon, Montana, Alaska and Delaware, collectively referred to as the N.O.M.A.D. \u2013 do not impose sales tax, but merchants in some cities in these states might still work to put vendors on the hook to collect local sales taxes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the rush to implement nexus laws, consistence was thrown to the wind. States continue today to find new and expanded ways to capitalize on the marketplace shift and capture more tax revenue. In broadening the tax base to digital goods, services, and advertising, to name a few, new sets of rules and rates, effective dates, and transaction and revenue thresholds make enforcement of Wayfair rules uneven and confusing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Today, the U.S. has over 10,000 taxing jurisdictions, making tax compliance is a tall task. Even small businesses operating in only a few jurisdictions must be vigilant to government notices indicating changes in nexus and the tax base. While automation helps, it is but one part of a compliance strategy for managing state and local tax obligations. Registering for one tax opens the door to additional scrutiny and taxing requirements. Knowing when a threshold is tripped and where to register to collect and remit taxes is an ongoing task. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Reach out to your professional adviser at <a href=\"https:\/\/taxops.com\/\">TaxOps<\/a> to interpret the sales activity and identify if and when nexus occurs so compliance is within reach.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>* On May 3, 2021, the Kansas legislature voted to override Gov. Laura Kelly&#8217;s veto of omnibus legislation imposing a sales tax collection and remittance requirement for remote sellers and marketplace facilitators exceeding a $100,000 sales threshold effective July 1, 2021, thus, now Kansas has a minimum threshold of $100,000 of sales into the state before economic nexus applies. For more information on Wayfair in Kansas, see this post from <a href=\"https:\/\/www.grantthornton.com\/insights\/alerts\/tax\/2021\/salt\/k-o\/ks-law-addresses-wayfair-tcja-provisions-06-22#:~:text=On%20May%203%2C%202021%2C%20the,threshold%20effective%20July%201%2C%202021.\" target=\"_blank\" rel=\"noopener\">Grant Thornton<\/a>.<\/p><\/blockquote>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">Let&#8217;s Talk Tax<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">More Tax News<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/#subscribe\" target=\"_blank\" rel=\"noreferrer noopener\">Subscribe to Tax News<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By the SALTovation Team at TaxOps By acting on Wayfair in 2018, the Supreme Court justices acknowledged that the rise of online marketplaces has forever changed the way we do business. How state and local governments collect revenue has forever changed with it. In June of 2018, the U.S. Supreme Court upheld South Dakota&#8217;s economic [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":10714,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:gallery {\"linkTo\":\"none\"} -->\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped\"><!-- wp:image {\"id\":10182,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/04\/Texas-High-Court-Clarifies-Service-Receipt-Apportionment-1-1024x536.png\" alt=\"\" class=\"wp-image-10182\"\/><\/figure>\n<!-- \/wp:image --><\/figure>\n<!-- \/wp:gallery -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><em><em>The Texas Supreme Court has ruled in favor of apportioning service receipts to the location of personnel or equipment, a position providing clarity to taxpayers on whether to source receipts from services performed versus where customers are at.<\/em>&nbsp;<\/em><\/p><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><\/p><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:paragraph -->\n<p>By <a href=\"https:\/\/taxops.com\/tram-le\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"Tram Le\">Tram Le<\/a> <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>On March 25, 2022, the Texas Supreme Court held in favor of the taxpayer that services revenue is apportioned to the location where services are performed, consistent with Texas law.<sup>1<\/sup> The Court found that the performance of service is located where the taxpayer\u2019s personnel or equipment is physically doing useful work for the customer.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The case involves Sirius XM (Sirius XM Radio, Inc. v. Hegar, Tx. Sup. Ct. No. 20-0462 (3\/25\/22)), whose headquarters, transmission equipment and production studios used in providing a subscription-based satellite radio service are largely located outside of Texas. In the 2010 and 2011 tax years, Sirius XM apportioned tax based on costs of activities in Texas and outside of Texas. Under Texas rules, service revenue is apportioned to Texas based on the \u201cfair value of the services\u201d rendered in Texas where services are performed in more than one state.<sup>2<\/sup>&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>For those tax years, the Texas Comptroller adjusted on audit to base the tax on the percentage of Sirius XM\u2019s Texas subscribers. The Comptroller argued that service revenue is sourced to Texas if the \u201creceipt-producing, end-product act\u201d takes place in Texas. In this case, such an act was considered the decryption of the satellite network and enabling of each subscriber\u2019s radio to receive Sirius XM\u2019s signal. However, Sirius XM argued that its services \u2013 the production and broadcasting of radio content \u2013 was mainly performed outside of Texas.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The Texas Supreme Court ultimately agreed that Sirius XM was providing satellite radio content and those services are performed in Texas if the labor employed in that service is doing the work in Texas. This constitues a natural reading of the law, which requires taxes due \u201cwhere service [is] performed in this state.\u201d This rejects the Comptroller premise of service taking place at the customer location. The Court also rejected the use of the \u201creceipt-producing, end-product\u201d test to determine where a service is being performed.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Although the Court ruled in favor of the taxpayer, the case was remanded to the Appellate court for further review of Sirius XM\u2019s cost of performing services and evidence to support its \u201cfair value of services\u201d performed in Texas.&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The Texas Supreme Court opinion provides clarification in apportioning service revenue in Texas and determining whether services are performed in the state. Taxpayers doing business in Texas should carefully review business operations, nature of services, i.e., properly characterizing the services provided to customers and location of equipment, facilities, and personnel to properly apportion revenue.&nbsp;&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In addition, if services are being performed in Texas and outside of Texas, taxpayers must properly evaluate methods of determining the fair value of services and maintain sufficient evidence to support what revenue is apportioned to Texas. Contact a TaxOps advisor is you need assistance assessing nexus and taxability in the state of Texas and everywhere you do business.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Tram Le is a member of the SALTovation team at TaxOps and an adjunct professor at the University of Texas at Arlington. She writes about hot topics in state and local tax affecting business operations and growth strategies and the Spreading SALTovation column for Tax Notes.&nbsp;Reach out to Tram at <a href=\"mailto:tle@taxops.com\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"Tram Le\">tle@taxops.com<\/a>.&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">Let's Talk Tax<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>More Tax News<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:latest-posts \/-->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/#subscribe\" target=\"_blank\" rel=\"noreferrer noopener\">Subscribe to Tax News<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[229,226],"tags":[252,31,284,126,265,913,41,19,101,268,80,964,1010,1011,128],"class_list":["post-10707","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-state-and-local","category-tax-news","tag-accountant","tag-business","tag-cfo","tag-cpa","tag-finance-professional","tag-new-tax","tag-nexus","tag-sales-tax","tag-state-tax","tag-tax-filing","tag-tax-provider","tag-tax-service","tag-tax-software","tag-us-law","tag-wayfair"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Wayfair-Opened-Floodgates-to-Sales-Tax-and-a-Whole-Lot-More.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10707","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=10707"}],"version-history":[{"count":4,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10707\/revisions"}],"predecessor-version":[{"id":10716,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10707\/revisions\/10716"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/10714"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=10707"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=10707"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=10707"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}