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Sunday, October 14, 2018

More on Wayfair

There have been many articles on the June 2018 US Supreme Court's decision in South Dakota v Wayfair. But, that's not surprising given the decision overrode 51 years of state tax precedence!  I've written two article (so far) and a few blog posts.

One post was on where I asked the question - what if the parties were not billion dollar vendors? I think it is too bad the vendors in the case were so large. After the case, Wayfair issued a press release noting that it was already collecting tax on 80% of sales with that figure growing as its logistics footprint grows (that is, it was setting up distribution or other operations in more states).

Wayfair's 2017 10-K also indicates it has over 1,300 engineers and data scientists! Well, that makes it a lot easier to create a logistics system to collect sales tax from all customers and remit it to the state. What about a vendor who sold 200 $1 items to customers in the state?

Additional examples of small vendors I came across recently in doing research on taxes and crowdfunding are small vendors raising money on crowdfunding sites such as Kickstarter. In fact, I gave $30 to a party trying to raise funds to create and distribute calendars. And they are not alone. There are similar sites where someone is trying to raise funds to create a comic book, artwork and more calendars. If the party I gave the money to hits his target (and he did), I'll be sent a printed calendar. The party says they will ship to anywhere in the world. Well, 200 or more of these sales in a state will create sales tax collection costs too in a growing number of states, despite being what appears to be a small vendor. Hitting that figure is more likely in high population states such as California.

I see that some of the sellers of calendars and comic books are providing a pdf of the item. While that is not taxable in all states, the seller needs to check the law in each state to be sure and for states that find sales tax nexus with 200 or more transactions in the state, whether that figure includes taxable and non-taxable transactions in that count.

Some states and likely more will enact legislation making the "marketplace facilitator" such as Etsy and eBay collect tax.  I think Kickstarter and other crowdfunding sites will likely fall under this definition, but states should be sure (see Pennsylvania's definition here). Unlike eBay and Etsy, Kickstarter does more than help people sell products. Also, the funders might be providing more than needed to receive the product. That raises more issues on the sales tax collection side. Also, when must the sales tax be remitted because on many sites, the party doesn't get the funds if their target is not met, or they might get the funds, but never deliver the product.

What do you think?


Alex said...

Wayfair is not indicative of the broad e-commerce market. They sell large, expensive pieces of furniture.Furthermore, you can argue that a large part of the cost is domestic shipping.

A company selling a lightweight item or a PDF (as you mention) is a totally different case.

From my perch it appears that most (maybe 70%) e-commerce sales are now collecting sales tax.

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