Four more states entered the remote-sales-tax-collection ring on Nov. 1.
New Jersey, North Carolina, South Carolina, and South Dakota—the state behind the U.S. Supreme Court’s groundbreaking June 21 South Dakota v. Wayfair ruling—have begun enforcing requirements that remote sellers collect and remit sales and use taxes.
This brings the number of states now requiring remote sales tax collection to 23, more than half of the 45 states that impose a sales tax. And while states have continued to tout the speedy enforcement of their laws, some trade organizations argue that sellers are being blindsided by the enforcement.
“The tax software needed to integrate across a vendor’s system take years—not months or weeks,” said Hamilton Davison, president and executive director of the American Catalog Mailers Association in Providence, R.I. “I can’t think of any instance in my 20 years in this industry where retailers have been asked to take such a sharp and sudden turn in the way they do things.”
Davison told Bloomberg Tax that vendors are also being forced to comply during their busiest season—the fourth quarter.
“The fourth quarter of the year is a time when companies hires extra staff—a time of high sales volume. You don’t want a company’s tax software system to fail during a time of high volume because its integration was rushed,” he said.
The U.S. Supreme Court’s June 21 Wayfair ruling killed Quill Corp. v. North Dakota, the Supreme Court’s 1992 physical presence threshold for when states could tax remote sales. The majority in the 5-4 ruling suggested strongly that South Dakota’s law requiring remote sellers to collect sales tax if they had more than $100,000 in in-state sales or 200 transactions would pass constitutional muster.
‘State of Disbelief’
Many remote sellers continue to be “in a state of disbelief this is really happening,” David Campbell, CEO of TaxCloud, told Bloomberg Tax. The fact that South Dakota—the state that took out Quill—is “going live” Nov. 1 adds another dose of reality, he said.
“It’s dangerous for anybody to think a state isn’t going to enforce its requirements immediately,” including the four additional states whose laws kick in Nov. 1, he said. “It’s also misguided to think there’s going to be an intervening event that stops this, such as a court-ordered injunction or an act of Congress.”
States are now “in the place they’ve wanted to be for a long time,” Campbell said. TaxCloud is one of several online service providers certified through the Streamlined Sales and Use Tax Agreement—a program under which sellers collect tax voluntarily and remit it to the 24 participating states—that calculates, collects, and remits sales tax automatically for internet sellers and marketplaces.
In South Dakota, revenue officials are anticipating a smooth implementation of their law.
“Absolutely, we definitely feel ready,” Wade LaRoche, spokesman for the Department of Revenue, told Bloomberg Tax. “We have already issued sales tax licenses to hundreds of remote sellers, and we value our partnerships with them. These remote sellers have not notified the department of any complications, but we will continue to be a resource to all of our current and future licensees.”
Pushing for 2019
In an Oct. 23 letter to U.S. congressional leaders, the ACMA urged lawmakers to introduce and enact legislation before the end of the year that in part establishes a “realistic and orderly” phase-in date of April 1, 2019.
“This is after the busy season has died down and allows retailers more time to integrate and test their systems,” Davison said.
Even one state group—the National Conference of State Legislatures (NCSL)—has recommended that states not fully prepared to enforce their laws wait until Jan. 1, 2019.
“We also realize that states are at different stages in the game for remote sales tax collection,” Jake Lestock a policy specialist at the NCSL, told Bloomberg Tax. “If a state is fully prepared to enforce, it is up to them to decide.”
With assistance from Tripp Baltz in Denver.
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