Do You Need to Collect Sales Tax in Other States?
Question: I have sales in several states. Do I have to collect sales tax in states other than my own?
Answer: Sales tax has always been a complicated issue, and it was made infinitely more complicated by the Supreme Court ruling in South Dakota v. Wayfair in 2018. The decision means that you must collect, file and remit sales taxes in states if your sales reach certain thresholds, such as number of transactions or dollar volume in a state, even if you don’t have an office or presence in that state. This becomes difficult and expensive on many levels.
The best course is to consult with a sales tax expert to learn what the sales tax requirements would be for your business in the various states in which you make sales. Once you file with a state, they expect you to file a report at whatever interval they designate even if you have no sales during that period. Therefore, it’s best to have expert advice before registering with a state. The states would love to have you collect sales taxes for them, but you might not meet the criteria and it might not be required.
To further complicate matters, sales tax rates and criteria change frequently, so I would advise asking your sales tax expert how often you should check in with him or her to make sure you are up to date.
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.