Internet Sales Tax | What Online Retailers Need to Know

hey it’s patti scharf CPA and co-founder
of catching clouds the leader in e-commerce accounting today we’re going
to talk about the big news of the week and that is that the US Supreme Court
made a ruling on the South Dakota versus Wayfair case and these this has huge
ramifications for online sellers and so I’m going to bring in my other
co-founder of catching clouds Scott Scharf my husband also and he lives and
breathes sales tax and he is going to give you the whole rundown on sales tax
and what this ruling means for you hi um as you’ve probably heard cuz it’s
bidding in the news everywhere quill is dead so Supreme Court ruled that quill
no longer applies so what does that mean well it’s now the wild wild west of
sales tax and what the states are gonna be doing this means that the states can
come up with their own laws and rules on when businesses both in their state and
outside of their state can’t have to register and collect sales tax Nexus and
the rules on the books in the state’s now are whether you have physical Nexus
you’re physically there you have property including your inventory sales
sales reps traveling there or affiliates and now the laws that they’ve added that
if they’ve set thresholds for economic Nexus or notice and reporting laws
basically say if you have more than a certain amount of revenue or a certain
number of transactions then you have Nexus in that state and the state can
expect you to register and collect sales tax in their state for all of the sales
into that state now one of the things you want to keep an eye on is the
transaction limit more than the dollar amount you go I was nowhere near a
hundred thousand dollars in that state but if your average sale price is $25
then you only need to sell $5000 in any of these states in a year in the
previous 12 months to have exceeded the limit and had more than 200 transactions
so keep in mind that that really it’s that 200 transaction limit now 25 states
have these laws on the books now the other states that don’t have them will
probably pass them quite quickly and look at getting a cut of all of these
funds of those states twelve of them have a transaction threshold and three
of them have revenue threshold of $10,000 so of per year of income okay
when you see these thresholds you want to read the details or talk to a
consultant because the the laws may not have gone into effect yet they may not
apply to you based on your products there’s a lot of
nuances okay now the interesting part about this is
South Dakota you basically need to be selling 1.8 million dollars of total
revenue to be able to have hit that threshold based on the population and
how few people are in South Dakota so they’re one that started all of this
and it really you’ve got to be almost a two million dollar business before you
have enough sales volume to have more than two hundred sales in South Dakota
so it’s just one of those things so these are the new rules that you have
Nexus if you’re an Amazon FBA seller you have sales tax in excess in up to 26
States wherever Amazon storing your inventory and then there are 11 of these
new threshold Nexus reporting states that that aren’t FBA States that you
need to be aware of so as an Amazon FBA seller you might have to register and
collect in 37 states really close to the total of 45 to be fully compliant plus
really any business over 20 million dollars per year in revenue you really
exceed that both the threshold and transactions and the revenue volume and
almost all of the states and that’ll get you pretty close to 45 states we really
are heading to a world where where we’re collecting sales tax on all transactions
everywhere that’s just a matter of how crazy the compliance is gonna be so how
does that impact you take a look at your own numbers download your sales total up
the number of sales per or for the last 12 months and if you exceeded this
transaction level then you have to decide if you’re gonna register and
collect in those states what is it going to cost you I don’t know if you’ve added
up the sales tax that you’re already doing or you’re not doing in general
that’s gonna cost about $200 to get registered per state between either your
time and figuring out the details or outsourcing it roughly paying $100 per
registration and then both any signup fees and state fees and other things
it’s about $200 per state for a safe budget – just to get registered then
safe budgetary number which you could realistically pay is between 50 and $100
per state per month yes 600 to 1200 dollars per year per
state that could mean between 27 and 54 thousand dollars a year if you’re
registered on all 54 states are v all 45 states that have sales tax sorry too
many states added up too many right there
so between outsourcing tools like tax gr tax if I dealing with a salt sales and
local tax expert notices fines fees late penalties extra state fees that they
don’t tell you about until your second year and all these other things you want
to be able to budget and know you know what the compliance is and then you’ve
got to decide if the cost of compliance and the risk of being audited or the
fines for not complying with these states if that risk is worth it up to
you versus the cost but it could be a significant percentage of your revenue
in sales in that state and all your margin on your sales in that state if
you have a low dollar volume and low margin products going into the states so
those are things you really need to consider all right so we know this is a
lot I’m sure you’ve seen articles on the news and and blogs and other YouTube
videos and everything else what we’re trying to do is help out what we’ve done
is the math for you so if you click on the link below we’ve generated a
spreadsheet that well that calculates out either based on transaction or
revenue based on the population which we’ve seen over the last seven years
really does apply pretty close as a good initial indicator of how products are
gonna sell across the country unless you know your products really only sell well
well into one state or the south or beach states or whatever else so you
have to look at your own data but we’ve really done the math for you so please
look at the link click the link down below and we will share that spreadsheet
with you you can put your own numbers in and see how that adapts for you and save
you the time of trying to figure out how all this comes together
anyway we wish you good luck we look forward to seeing questions down below
and take care I hope you found this video helpful if
you did please like comment and share and I’ll catch you later

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  1. Thanks for watching! Do you have any more sales tax questions? Include them in the comments below.

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