Pushback on Wayfair Sales Tax Changes
When the Supreme Court rolled back Quill and allowed states to collect sales tax from out-of-state remote sellers, plenty of people were happy. Main Street brick and mortar shops figured they’d get back some of the traffic they’d lost to e-commerce. States dreamed of billions in new revenue. Communities hoped for re-energized downtowns
But no one should be surprised that there has been some pushback. Most experts are expecting to see lots of court cases before everything settles down. The first big objection isn’t going to the courts, though. It’s a grass-roots movement among small businesses in Colorado, and the state of Colorado has decided to delay their sales tax changes till at least May of 2019 to cope with it.
Colorado is a good choice for a test case. Taxes are already complicated in Colorado, because there are at least 638 separate jurisdictions in Colorado. “Home rule” allows cities to set their own rates. They can also set their own rules. A jeweler in Longmont pointed out to Fox News that the small mountain town of Crested Butte charges $100 to register to remit sales tax. He says he rarely gets orders from Crested Butte, so he could get an order for a $50.00 pair of earrings and pay $102.50 for the privilege. He figures he’ll just refuse to sell to Crested Butte.
Small business owners complained to legislators about the cost of bookkeeping to adjust to the changes. Switching from three tax codes to thirty, as a Denver paint company expects to, will drive her costs up into “undue burden” territory. Many business owners complained that the software they use to calculate taxes is based on zip codes — that doesn’t work well anywhere, but it absolutely can’t cope with Colorado’s freewheeling system. Business owners were predicting that they would move their shops out of state, or shut them down completely.
In-state companies suffering?
Colorado law doesn’t exempt small in-state businesses in their sales tax regulations. Out of state businesses aren’t affected by the new remote sales tax rules unless they have $100,000 in sales in Colorado, but in-state businesses are affected by the sales tax regulations no matter how little they sell.
Officials have pointed out that Colorado businesses aren’t affected by the Wayfair ruling. They should already be registered and collecting sales tax in other towns in Colorado. Like consumer use tax, that rule hasn’t been enforced before. Now home-rule cities are getting giddy at the prospect of collecting more sales tax, and they’re insisting that in-state e-commerce companies must pay up.
For many Colorado companies that ship goods all over the country, the in-state issues have gotten folded into their concerns about the new out-of-state economic nexus issues. Colorado has a sales and use tax simplification task force, and some are hoping that a simplified uniform code may help solve the problem.
We can’t forget, however, that one of the great motivations for states to support changes in sales tax laws is to increase their income. Colorado could see an extra $10 billion in revenue from sales tax. That might be worth responding to business community complaints with a wave of audits.
Sales tax will be complicated and painful for a while. But the right software can make a big difference. Try Sales Tax DataLINK to see what our level of accuracy and control can do for you.
a Sales Tax Compliance beyond Your State We spoke with a rancher recently. She sells livestock nationally. We asked if she charged sales tax. Only in her state, she told us. When she ships animals across state lines, she doesn't collect sales tax. Is...
The question is: when we buy online, where does that transaction take place? The answer is almost philosophical, but it’s the basis of much of the
confusion about internet taxes and nexus. In 1992, the Supreme Court reversed a North Dakota…
a Nexus Creation Do you have to collect sales tax on transactions in a given state? Nexus is the determining factor. In the past, nexus was created once a steady physical presence, whether by people or property, was established within a state or...