Internet Sales Tax | What Online Retailers Need to Know
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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

29 Comments

  • Edwin Figueroa

    Word on the street is that for Amazon FBA most believe Amazon will have in place if not already means for collecting sales tax and taking care of this for you. Would make sense as the burden would be too great for small Private Label Sellers. Have you heard similar rumblings?

  • zaffero77

    If this is going to go down as you guys say it probably will with compliance. This is an absolute disaster, this is going to play probably 90% of Amazon, eBay, and other sellers out of business. This is one of the worst supreme court decisions ever.

  • ldffly

    This is the best quick video I've seen on the SD v. Warfair decision. This decision was a mess and opens potential disaster for thousands of businesses.

  • Jennifer Saxon

    Great information on understanding the possible ramifications of this US Supreme Court ruling. Thank you.

  • Macy Wang

    This is a quick and good one of the explanation for the businesses and people already have the knowledge about sales tax and nexus about the impact from this ruling.

  • David Philpott

    Great video. My question on the new ruling is: for fba sellers, are we still under the physical nexus with all of the different fba locations, or are we now just under an economic nexus?

  • Jessica Berkley

    Thank you for sharing this video. It really helps people to understand that impact of this change and what first steps they can take to start reviewing the impact to their business!

  • Chaos & Coffee

    Thank you from two entrepreneurs from Colorado!! We operate two businesses — one service based (zoodilly.com) and one with a product we invented and manufacture here in our state (nuhni.com). This is the BEST video we have found on the topic. We will be concentrating on wholesale and B2B from here on out. Thank you both!!!!!

  • Ashish Gupta

    Awesome video – thank you! Questions: 1) Is sales tax thresholds calculated by calendar year or prior 12 months? 2) For economic nexus, do you only have to register and start collecting sales tax AFTER you've reached the $ or transaction qty minimums for each state for the prior 12 months (or prior calendar year)? Or, do you need to start collecting sales tax now even if you've not reached the $/qty minimum threshold yet but may reach it before the end of the calendar year? Thank you in advance!

  • Rebecca Freauff

    I was wondering if you knew anyone that is familiar with this in relation to Teachers Pay Teachers. I know several of us are quite confused and we're not sure who we should turn to or what we should be looking for in a tax professional.

  • iColorContactLenses

    So they're going to flip the burden of the buyer being required to report use tax to their state on to the sellers? Retarded. But I read we aren't required to, all we have to do is send the state a list of buyers and addresses and then they can sort out the shit show themselves and try to collect tax from each buyer.

  • Andrew Watt

    I don't understand – you're saying that a Private Label Seller on Amazon could be spending $20,000 per year in state tax FILING fees? That would make it completely infeasible.

  • John Stanowski

    When you say we will have "economic Nexus" in a certain state if we have more than a certain amount of revenue or more than a certain number of transactions, do you mean revenue and/or transactions from that state? Or as a whole?

  • John Stanowski

    If we don't pass the threshold for each state, does that mean we do not have to collect any sales tax for that state?

  • Ticky Tocky

    No point buying on ebay anymore, you don't save any money any longer and the stuff is usually either broken, counterfeit or stolen off the porch. Government always ruins everything good, US mail will feel it along with every other shipper, the only ones who get anything good out of this decision are the illegals sucking up all of our tax money. I will now warm up my big ol diesel truck and head to the store.

  • jerry c

    MOST OF ALL THE STATES HAVE A 200 TRANSACTION THRESHOLD, SO YOU WOULD HAVE TO MEET THAT 200 THRESHOLD FOR THAT STATE CORRECT? IT'S NOT A TOTAL OF ALL THE STATES,EXAMPLE: 50 TRANASACTIONS IN 4 STATES-THAT WOULDN'T MATTER -CORRECT?

  • RootdTV

    Thanks in advance for your awesome video. I'm working on selling e-commerce merch (mostly apparel) and don't expect to exceed 200 orders in any state, so would I be safe not charging any sales tax until I hit those thresholds or should I put in a software like TaxJar/Avalara now just to be safe?

  • Peter Ode

    TaxCloud is another provider of plugins for WooCommerce, Shopify and other eCommerce platforms. Seem that TaxCloud is less costly, is transparent about the states that enforce compliance with sales tax collections and the best choice. Do you have any comments or suggestions about TaxCloud vs TaxJar for a small or start-up eCommerce site?

  • Toys Imagination & Creations

    If i live in Illinois and I sale on ebay to other states but have no physical nexus or employers do i still need to charge illinois sale tax?

  • Bob Silfer

    Hi folks, I realize this video is a year old but at 4:43 you mention that one should budget about $200 for sales tax permit registration fees. From the info I've gathered, most states are free and if not, they are relatively affordable at around $10-20, with Connecticut being the exception at $100. Are you coming up with that figure assuming that one would be paying a service to do the registration filing? And at 5:08 you mention monthly management and filing fees of between $50-100. Again are you assuming that a service will be doing the filing or are there fees that the states charge for simply having the sales tax permit outside of the original registration fees? Isn't it possible to do the original sales tax permit filing and the state sales tax filing requirements on your own?

  • JEWISH COMMUNISM

    these government assholes will do anything inhumanely possible to F!!k up this economy.
    Oh yea, this has put a MAJOR stop to my internet purchasing and I'm certain I'm not alone…. These morons couldn't sharpen a pencil without screwing it up. THIS ISN'T AN ISSUE OF COMPETENCE BUT ONE OF CRIMINAL ENTERPRISE.

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