Due to the fast evolving legislation surrounding economic nexus and sales tax, we have put together the below summary to get you up to speed on the recent changes that may affect your business’s compliance.

As of now, ten states have implemented new economic sales tax nexus rules, many of which went into effect on July 1, 2017. Under these new rules, even businesses with no physical presence in a state may be required to collect and remit sales taxes on sales into the state. These states are Alabama, Colorado, Indiana, Louisiana, Ohio, Tennessee, Vermont, Rhode Island, Washington, and Wyoming.

This may have a significant impact on your business.

What are the New Rules?

Effective on July 1, 2017 for six of the ten states listed above, if your business has nothing but sales into one of these states, you will either have sales tax nexus (i.e., will have to charge sales tax and begin filing sales tax returns) or will have to report details about the tax to your customers and to the state.

For example:

• If your business sells >$50,000 to Louisiana customers but has no physical presence in the state, it will now be required to notify Louisiana customers and the state of use tax due.
• If your business sells >$100,000 to Indiana customers but has no physical presence in the state, it will now be required to charge customers sales tax.

From a legal standpoint, these states are marching on questionable grounds and the U.S. Supreme Court may ultimately overturn these new rules. In the meantime, however, these states will begin imposing penalties on non-complying businesses. 

Here’s What You Can Do:

Please contact Adirah Goldberg at adirah@pstein.com to determine if this will impact your business. If so, you will need to move quickly to properly comply with these new rules.

Here are some example of businesses with issues:

•         An out-of-state manufacturer that sells/ships > $50k of goods to Louisiana customers but does not file Louisiana tax returns;
•         An out-of-state reseller that sells/ships > $250k of goods to Alabama customers and that contracts with a third party to solicit sales in Alabama but does not file Alabama returns;  
•         An out-of-state software-as-a-service (SaaS) provider that sells >$100k to Indiana customers but does not file Indiana tax returns.

If your business isn’t directly impacted by one of these states, it likely soon will be as more than half of all states introduced legislation during 2017 implementing these very rules. This is a very “hot item” in state taxation.

Our Hi-Tech and Corporate tax team at Philip Stein & Associates is looking forward to helping you navigate these new challenges.

All the best,

Adirah Goldberg, CPA

Manager, Hi Tech  & Corporate Tax Department

02-644-4003