Sales tax laws are changing quickly – and as a handmade business owner you need to know the rules about economic nexus and be prepared!
You may have heard or read about South Dakota vs. Wayfair, Inc. and sort of just dismissed it for any number of reasons – but it is a really big deal.
Under this new law sales tax nexus is based on sales revenue, the number of transactions OR a combination of both.
Back on June 21, 2018 the Supreme Court pass a law (that started with the whole South Dakota vs. Wayfair, Inc. thing) in which every state that had not already done so – may now pass State Laws requiring ALL online retailers (yup, that includes us) to collect and remit sales tax to the state where the customer lives/product is shipped – when certain triggers happen.
The trigger can be a specific dollar amount in sales revenue, a specific number of transactions, or a combination of both – for each state where you have sales/ship product.
I wrote a blog post that provided a basic overview of the Supreme Court Decision called, Sales Tax, the Supreme Court Decision & your handmade business.
There was no formal provision or exemption for small or micro-businesses such as our handmade businesses included in the law the Supreme Court passed – it is being left up to each state and/or sales tax jurisdiction to make their own state specific laws.
Which means that as business owners we need to know the rules for each state/tax jurisdiction that we sell or ship our finished items to-in order to KNOW what triggers our responsibility and keep track of our sales to each state.
The Supreme Court also sort of threw this whole mess back at the Federal Government – basically saying that Congress needed to do something about it.
UPDATE 8/26/21 Since the end of June I’ve been doing a lot of reading and research on this whole mess (mainly for the software business that my husband & I own) and I thought I’d share that information with all of you in what ended up being a 28-page eBook specifically for crafters. It will outline your responsibility of collecting and remitting Sales Tax when you sell finished handmade items and digital goods to customers in other states. Because we all need to know the rules.
Purchase your copy for $5.00 through 9/15/21.
All of the state governments have been busy little beavers enacting Sales Tax Nexus Laws that go into effect anywhere from July 1, 2018 straight through into April, 2019. Each state has its own exemption or trigger for when a businesses annual sales and/or annual transactions will require them to start collecting and remitting sales tax. And yes, it’s all quite confusing!
So here we are into the later half of September — and I’m FINALLY starting to feel like I have some sort of handle on this whole mess — and BAM!!!!!
On Friday September 14, 2018; Congress introduced a bill to phase in online sales tax collection! Yup, now the Feds have finally stepped up to the plate. Their bill would:
Ban retroactive taxation, establish an orderly phase-in of compliance obligations, and create a small business exemption. It bars states from imposing sales tax collection duties on remote sellers for any sale that happened prior to 6/21/18, the date that the Wayfair decision was handed down by the Supreme Court. It would also prevent states from imposing sales tax collection duties before 1/1/2019. It provides a $10 million exemption for small business sellers, until the states produce a compact, approved by Congress, (way) to simplify collection to the point where no small business exemption is necessary.
I have not yet heard if this bill has been passed – but if it does – WHAT happens to the individual state laws that are due to go into effect BEFORE that 1/1/2019 date? And what about the states who have a MUCH lower exemption rate than the $10 million one set by this bill?
Only time will tell – and I’ll be sure to keep you updated as I find out information.