Supreme Court overturns Quill, subjects all internet transactions to sales tax

[BobC]

Thought this might be of interest to some of you regarding a follow-up to the recent Supreme Court case involving Wayfair in South Dakota. Here's a link to a recent article in accountingToday that talks about the possible ramifications of the ruling and potential reactions from other states going forward.

https://www.accountingtoday.com/news...les-of-wayfair

The interesting thing here to note is that under this Remote Seller's Law, originally enacted by South Dakota and effective back on May 1, 2016, is that their threshold and definition of a large online retailer/seller is anyone with more than $100,000 in sales to South Dakota residents/businesses in a current or prior year OR 200 or more transactions with residents/businesses in a current or prior year. Hitting $100K in sales may be a little tough for smaller sellers but, having over 200 transactions may not be so tough, especially for anyone selling a lot of smaller value cards. This puts outfits like PWCC and Probstein right in their cross hairs as 200 transactions a year only amounts to about 16-17 sales a month, which is really not that many and will likely impact quite a few sellers on Ebay.

Also, this recent Supreme Court ruling is not the final action. The case actually went back to South Dakota courts then for final resolution, so the actual law has not yet officially been put into full effect yet and still has to get over some additional constitutional hurdles. Here's another article talking about the history of this and where it now stands. Still, this should start being enforced sooner than later I would think as the South Dakota courts had already aligned with the state on the legality of this. Thankfully it sounded like South Dakota was only going to enforce this going forward, and not put any added burden on businesses by trying to make the law retroactive as trying to go back and collect sales tax after the fact is virtually impossible in my opinion.

https://www.salestaxinstitute.com/re...constitutional

Another interesting question is what exactly counts as a "transaction" towards the 200 per year threshold. If someone buys from a catalog or off a website from a seller like say Kit Young or Wayne Varner, i would think the total number of things they purchased at the same time would be bundled and sold altogether as one transaction. However, if such a seller also sells items on Ebay, which I'm pretty sure both of these guys I mentioned do, I'm not sure if each individual listing being sold on Ebay would be considered as a separate transaction or not, even if someone purchased several items all at once and then bundled and paid for them through checkout in one payment. I'm guessing that is something the South Dakota sales tax department will have yet to determine and opine on.

Also, sellers have to remember that if they sell through catalogs, websites, Ebay, or via other means, the $100K and 200 transaction thresholds are for total sales and activity through all those venues added together, not just Ebay sales and transactions. Ebay sales and transactions are probably the most visible and easiest for the states to go look at though, which is another reason Ebay is very unhappy about this because they are so big and visible to the states. Sellers trying to get around this may just reduce their activity on Ebay, or get off it entirely, so South Dakota doesn't come looking for them. Ebay knows this will likely have some negative impact for them going forward, just how much, no one knows yet. Also, it will possibly put Ebay in the middle if the South Dakota sales tax department comes asking them for information on sales into their state, or detail on seller's activity such as sales amounts or the number of transactions with SD residents/businesses. They won't have much of a choice and will likely have to comply with any such requests, so this will probably cost them additional time and effort as well.

This could become real interesting, and not necessarily in a good way!!!

[BosseFieldBoy]

I got a notice from Heritage that they will be including sales tax effective 8/1. Has anyone received a similar notice from any of the other auction houses?

[bobbyw8469]

I have never understood how you can pay sales tax on a USED item where the sales tax was already collected at the time the item was sold.

[Throttlesteer]

For the record, State and Federal tax revenues are at all time highs. Government can sing a sad song about losing revenue to internet transactions. The bottom line is, they have more money than ever.

[BobC]

Originally Posted by Throttlesteer

For the record, State and Federal tax revenues are at all time highs. Government can sing a sad song about losing revenue to internet transactions. The bottom line is, they have more money than ever.

Yes, but the cost of everything those taxes pay for is also likely at all time highs as well. I don't like paying taxes anymore than anyone else does, it is just a fact as well that most things cost more today than they did 10, 15 , 20+ years ago, and so on.

[jcc6252]

Originally Posted by BosseFieldBoy

I got a notice from Heritage that they will be including sales tax effective 8/1. Has anyone received a similar notice from any of the other auction houses?

FYI, Here's a question I posed to HA, and their response:

For those of us who are not licensed resellers, is sales tax now added to all purchases, regardless of the buyer's state of origin? If so, do you use the buyer's sales tax rate?

Hello,

Thank you for your email. Eventually all states will have applicable sales tax but for now, the taxable states are as follows:

New York
Illinois
Florida
Texas
California
Connecticut
New Jersey
Hawaii
Kentucky
Maine
Mississippi
Ohio
Pennsylvania
Vermont

On September 1st 2018 we will be charging sales tax in:

Colorado
Massachusetts
Michigan
Oklahoma
Rhode Island
Tennessee
Washington

The tax charged will be the rate in each Buyer’s location.

[savedfrommyspokes]

Noticed the following message posted on ebay:


As you may know, the Supreme Court ruled in favor of South Dakota in June 2018, which removed the requirement that certain retailers have a physical presence in a state in order for that state to impose sales tax obligations on these retailers.

Some states have extended the tax collection obligation to marketplaces. We believe this ruling is unfair to small businesses and will continue to call for greater simplicity. In the meantime, we’re working to find the best way to support our sellers.

What this means for eBay sellers: Regardless of where you’re physically located, if you sell to buyers in certain states, those states may require you to collect applicable taxes on your transactions.

Therefore, based on these new laws, we will calculate, collect, and remit sales tax for orders shipped to customers in the following states on the following schedule:
•Washington—starting Jan 1, 2019
•Pennsylvania— starting July 1, 2019
•Oklahoma—starting July 1, 2019

Once we start collecting tax in these states, you do not need to take any action. There are no extra charges or fees for this service. Prior to these dates, please continue to collect and remit tax in these states and comply with any other applicable requirements they impose.

There are no opt-outs for selling items into the states listed above, or out of eBay automatically collecting sales tax for items shipped to the states above.

Additional states will likely be added to the above list. Stay informed on the Help pages.

For more information on these new tax requirements, we recommend that you consult with your tax advisor. If you do not have a tax advisor, we’ve partnered with Avalara and TaxJar and they will have specific insights into the best course of action for you.

It appears for the first three states they mention, that ebay themselves will not only calculate, but collect and remit the taxes at no extra cost to the seller.

My only question is will re-sellers buying through ebay still be required to pay the sales tax?

[mintacular]

So basically as a CONSUMER BUYER of eBay items from PA PENN my bill will include a 6% tax starting JULY 2019!!!!?????

[BobC]

Originally Posted by savedfrommyspokes

Noticed the following message posted on ebay:


As you may know, the Supreme Court ruled in favor of South Dakota in June 2018, which removed the requirement that certain retailers have a physical presence in a state in order for that state to impose sales tax obligations on these retailers.

Some states have extended the tax collection obligation to marketplaces. We believe this ruling is unfair to small businesses and will continue to call for greater simplicity. In the meantime, we’re working to find the best way to support our sellers.

What this means for eBay sellers: Regardless of where you’re physically located, if you sell to buyers in certain states, those states may require you to collect applicable taxes on your transactions.

Therefore, based on these new laws, we will calculate, collect, and remit sales tax for orders shipped to customers in the following states on the following schedule:
•Washington—starting Jan 1, 2019
•Pennsylvania— starting July 1, 2019
•Oklahoma—starting July 1, 2019

Once we start collecting tax in these states, you do not need to take any action. There are no extra charges or fees for this service. Prior to these dates, please continue to collect and remit tax in these states and comply with any other applicable requirements they impose.

There are no opt-outs for selling items into the states listed above, or out of eBay automatically collecting sales tax for items shipped to the states above.

Additional states will likely be added to the above list. Stay informed on the Help pages.

For more information on these new tax requirements, we recommend that you consult with your tax advisor. If you do not have a tax advisor, we’ve partnered with Avalara and TaxJar and they will have specific insights into the best course of action for you.

It appears for the first three states they mention, that ebay themselves will not only calculate, but collect and remit the taxes at no extra cost to the seller.

My only question is will re-sellers buying through ebay still be required to pay the sales tax?

If what is being said is true, that in those listed states Ebay will start to bill and collect the sales tax and there are absolutely no opt outs, that is 100% wrong and going against basic sales tax laws. If a bona fide re-seller purchases something through Ebay that they then turn around and sell to others, they should not be charged sales tax on the purchase. Here's a link to one of Washington State's websites talking about and explaining the use of a Re-Seller Permit in the State of Washington. It clearly states how a buyer that is going to resell something should not be paying sales tax on it.

https://dor.wa.gov/find-taxes-rates/...seller-permits

This could become a nightmare for anyone that buys items for their business through Ebay to then resell if Ebay is not going to honor their re-seller and sales tax exemption certificates. This could become a real paperwork and tax nightmare if this happens. I've got to believe Ebay hasn't fully explained what will actually happen in this case as they're probably still working this out themselves. I'm guessing before they have to actually start doing this that they will come up with a program to allow valid re-sellers purchasing items through them to submit exemption certificates that will allow those purchases to be sales tax exempt. How they're going to implement it though, and differentiate between taxable and non-taxable purchases that a buyer might make, is going to interesting to say the least.

This is exactly why Ebay was against this new Supreme Court ruling and was sending petitions out to people and asking for signatures and telling people to call their Congressmen and so on. And if Ebay does end up having to go through with this and start doing it, you can bet it is going to cost them time and money to comply. How long before you think they'll come up with some way to pass the added cost on to their dealers then???

There was another thread not too long ago where someone asked the question about the possibility that card shows might make a comeback because of all this nonsense. Well, if the various states and taxing authorities keep going after everyone like this it, it may start to happen sooner than later.

[yanks12025]

Just wanted to bump this back up with the new year 2 days away.. Has anyone heard anything new lately about this?

[steve B]

Originally Posted by BobC

Thought this might be of interest to some of you regarding a follow-up to the recent Supreme Court case involving Wayfair in South Dakota. Here's a link to a recent article in accountingToday that talks about the possible ramifications of the ruling and potential reactions from other states going forward.

https://www.accountingtoday.com/news...les-of-wayfair

The interesting thing here to note is that under this Remote Seller's Law, originally enacted by South Dakota and effective back on May 1, 2016, is that their threshold and definition of a large online retailer/seller is anyone with more than $100,000 in sales to South Dakota residents/businesses in a current or prior year OR 200 or more transactions with residents/businesses in a current or prior year. Hitting $100K in sales may be a little tough for smaller sellers but, having over 200 transactions may not be so tough, especially for anyone selling a lot of smaller value cards. This puts outfits like PWCC and Probstein right in their cross hairs as 200 transactions a year only amounts to about 16-17 sales a month, which is really not that many and will likely impact quite a few sellers on Ebay.

Also, this recent Supreme Court ruling is not the final action. The case actually went back to South Dakota courts then for final resolution, so the actual law has not yet officially been put into full effect yet and still has to get over some additional constitutional hurdles. Here's another article talking about the history of this and where it now stands. Still, this should start being enforced sooner than later I would think as the South Dakota courts had already aligned with the state on the legality of this. Thankfully it sounded like South Dakota was only going to enforce this going forward, and not put any added burden on businesses by trying to make the law retroactive as trying to go back and collect sales tax after the fact is virtually impossible in my opinion.

https://www.salestaxinstitute.com/re...constitutional

Another interesting question is what exactly counts as a "transaction" towards the 200 per year threshold. If someone buys from a catalog or off a website from a seller like say Kit Young or Wayne Varner, i would think the total number of things they purchased at the same time would be bundled and sold altogether as one transaction. However, if such a seller also sells items on Ebay, which I'm pretty sure both of these guys I mentioned do, I'm not sure if each individual listing being sold on Ebay would be considered as a separate transaction or not, even if someone purchased several items all at once and then bundled and paid for them through checkout in one payment. I'm guessing that is something the South Dakota sales tax department will have yet to determine and opine on.

Also, sellers have to remember that if they sell through catalogs, websites, Ebay, or via other means, the $100K and 200 transaction thresholds are for total sales and activity through all those venues added together, not just Ebay sales and transactions. Ebay sales and transactions are probably the most visible and easiest for the states to go look at though, which is another reason Ebay is very unhappy about this because they are so big and visible to the states. Sellers trying to get around this may just reduce their activity on Ebay, or get off it entirely, so South Dakota doesn't come looking for them. Ebay knows this will likely have some negative impact for them going forward, just how much, no one knows yet. Also, it will possibly put Ebay in the middle if the South Dakota sales tax department comes asking them for information on sales into their state, or detail on seller's activity such as sales amounts or the number of transactions with SD residents/businesses. They won't have much of a choice and will likely have to comply with any such requests, so this will probably cost them additional time and effort as well.

This could become real interesting, and not necessarily in a good way!!!

What I wonder is how they expect sellers on the edge of either of those thresholds to handle the collection of taxes. Are they required on sales After the threshold has been crossed? Or on all sales, so sort of retroactively.
What happens if I collect tax, and end up at say 199 transactions and under 100K? Do I refund the tax collected (which would be proper, as it wasn't required) Or do I still pay it (Which is also proper as I've collected it on their behalf, so it's owed to them)

And, if I have a competitor who hasn't met the threshold and hasn't been collecting tax because they know they won't pass that level. Can I then stick it to them by having a friend make a bunch of purchases right near the end of the year putting them over and possibly being on the hook for the taxes they'd now owe.

What a mess.

[BobC]

Originally Posted by steve B

What I wonder is how they expect sellers on the edge of either of those thresholds to handle the collection of taxes. Are they required on sales After the threshold has been crossed? Or on all sales, so sort of retroactively.
What happens if I collect tax, and end up at say 199 transactions and under 100K? Do I refund the tax collected (which would be proper, as it wasn't required) Or do I still pay it (Which is also proper as I've collected it on their behalf, so it's owed to them)

And, if I have a competitor who hasn't met the threshold and hasn't been collecting tax because they know they won't pass that level. Can I then stick it to them by having a friend make a bunch of purchases right near the end of the year putting them over and possibly being on the hook for the taxes they'd now owe.

What a mess.

Those are great questions, and things that need to be addressed by South Dakota ultimately. You're right in that it is sometimes impossible to predict exactly when you would hit these thresholds and thus become responsible for collecting and remitting the sales tax. I would suggest to anyone that felt they were going to hit these thresholds that they just start charging the sales tax and filing with SD. The thresholds are only for when it becomes mandatory under the state law, it doesn't mean that a person or company that hasn't reached the volume of sales or transactions to hit the threshold yet can't still go ahead and start to charge and collect the sales tax before they reach that point.

Also, in cases where a person/company reaches the threshold during some year, I would just start the process of collecting and remitting the sales tax at that point, and going forward. Don't forget that before doing so, the person/company would also have to register with the state of South Dakota first to let them know they are now liable for collecting and remitting sales tax. Not 100% sure what that process is in South Dakota, but you normally have to register in whatever state(s) you're in and get some kind of license or ID #, and then start filing sales tax returns and remitting the sales tax collected going forward. The states know it isn't easy to go back and try to collect sales tax from prior customers, so I doubt they'll end up forcing any person/business to do so.

As for the idea of having a friend start buying from a competitor to push them over the threshold to have to start collecting sales tax in a particular state, how would you know how close to the thresholds someone is? You could have a friend end up spending a lot of time, effort and money, for nothing. Also, just because someone hits one of these thresholds doesn't mean they'll pay attention to it. And as of right now, no one knows to what extent South Dakota, or any other state for that matter, will go to check up on companies to enforce these laws. These states don't have the resources to go after every single person/business out there to enforce rules like this. They'll immediately go after the low hanging fruit and get the big companies, like Wayfair, Amazon and Overstock to comply, if they aren't already. As to how much time and effort they then put in to go after the smaller businesses.....that is a whole other question no one can likely answer as of right now. Since these vendors are by definition outside of the state they'll be collecting sales tax for, its not like some state auditor is going to pull up at their doorstep and ask to check their records. That's where I wonder if the states will try to get third party information from someone like Ebay to start determining who to go talk to.

[Fastball]

IMO a simple solution would be to begin the taxation at sales above the $100K threshold, that way once it is reached then retailer can begin collecting taxes.

[Buythatcard]

A simpler solution would be not to have any taxes.

[BobC]

Originally Posted by Buythatcard

A simpler solution would be not to have any taxes.

Amen brother!!!!!

[insidethewrapper]

I can't believe states just don't charge per year for a "sales tax license". In Michigan, the license is free ! Just paperwork for Michigan Sales at the present time. It would be simple to just charge all businesses , for example: $ 100 a year for the license, and high volume stores etc. would need to fill out additional forms.