United States

Keeping up with sales tax on remote purchases


Changes in buying habits over the past 20 years have made the consistent application and collection of sales tax challenging for businesses and states. Todd Hendricks and Yudit Freda explain why remote sales tax is such a volatile issue in today’s economy. Visit our online and remote sales resource center for more insights on this topic. 


Keeping up with sales tax on remote purchases 

Sales tax on remote purchases is one of the most controversial areas of state taxation. Online sales and sales by catalog companies—most of them are not subject to sales tax. States are aware of this and are looking for ways to recoup some of those losses.

Why is sales and use tax on remote purchases so important? 

States are losing an estimated 2-22 billion dollars in sales tax annually. They have really begun to take notice and have gone through a wide variety of efforts to try to recoup these funds.

You may have received a nexus questionnaire in your career, or a time or two, and these are attempts by the states to get you to collect and remit sales tax in their jurisdictions.


How does the Quill court case factor in? 

Quill is a United States Supreme Court case from 1992. Quill stands for the idea that a company has to have a physical presence in a state in order to be required to collect that state's sales tax or that state's use tax.

The economy has evolved since 1992. The sales tax laws and rules have not evolved with the economy. What's happened is the states are losing those billions of dollars and they're trying to find ways to work around Quill or totally avoid Quill.

How are states approaching remote sales tax? 

The states have done a few different things to try and work around Quill. One of the things they did was introduce legislation in Congress, called the Marketplace Fairness Act (MFA). The MFA would require a seller to collect tax in any state that they make sales into, even if they don't have a physical presence in that state.

Currently, Congress is not acting on that. States are trying to attempt other ways to do that. There's a couple of different areas that they're using. They're using something called click-through nexus, they're expanding some of the ideas regarding affiliate nexus. Some states have even gone to attempts at economic nexus.

What can companies do in the face of all this change? 

First, get an understanding of your company's physical nexus locations. Under Quill, things like where your inventory is located, where you have a sales force located, or where employees might be travelling should be considered.

Second, consider the new nexus standards that have been implemented by some states.

Third, identify any potential growth and expansion areas for your business. All of these things can ensure that you stay on top of your nexus and filing requirements. 

Contact us today for a comprehensive sales tax process review. 


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