‘Wayfair’ Sales Tax Compliance Burden Grows

September 17, 2020


By Patrick A. Heller

I doubt that many—if any—coin dealers know the answers to all of the following questions.

  1. 1. Can you name the U.S. state where the governor and the revenue department have declared that a single sale by an out-of-state business to a resident of that state means that the business must register with that state government to collect, report, and remit that state’s sales tax, no matter whether or not the merchandise sold would be subject to that state’s sales tax? (Hint: that state’s attorney general disputes that the governor and revenue department can adopt this standard without going through the legislative process.)
  2. 2. Can you name the populous U.S. state that, following the June 2018 U.S. Supreme Court decision in South Dakota v Wayfair, Inc. was one of 41 states that announced it would not seek to collect retroactive sales taxes from out-of-state businesses for their sales to make to state residents before the decision—but has now changed that position and won a Circuit Court case seeking to collect retroactive sales taxes, fines, and interest from an out of state seller?
  3. 3. For each U.S. state that has adopted legislation or regulations now requiring out-of-state businesses to register to collect sales taxes on sales to state residents once they exceed the specified thresholds for the number of transactions or sales volume, can you identify which of these states define sales volume as either 1) all sales to in-state residents and businesses, 2) all sales to in-state residents and businesses that are not for resale, or 3) all sales to in-state residents and businesses where the merchandise would be subject to sales tax?
  4. 4. For those businesses selling via Amazon through the Fulfillment by Amazon service, did you know that Amazon may locate your inventory in any state it decides, with no input from the business on this decision and without even informing the business, which could make that business subject to registering with that state’s tax agency to collect sales taxes—even if the business never makes any sales in that state?
  5. 5. Did you know that even if you sell through a third-party seller such as Amazon or eBay that charges, collects, and remits the applicable sales taxes on behalf of the selling business, the out of state businesses may still be required to register with the state governments and file tax forms in the states where the online buyers live?
  6. 6. Can you identify at least one state that has a rare coins and precious metals sales tax exemption but where local sales taxes may still apply?

If you don’t know the answer to every one of these questions, you are at risk of non-compliance with laws and regulations in states across the country. The potential taxes, fines, and penalties could put the survival of your business at risk.

Every state government is clamoring for more tax revenues to cover soaring budget deficits and a nationwide cumulative of perhaps $10 trillion of unfunded liabilities for government employee pensions and retiree health care benefits. In the past, businesses did not have to register with any state government to collect sales tax unless it had physical nexus through having either a store or office in that state, employees working in the state, or inventory stored in the state.

The South Dakota v. Wayfair, Inc. decision allowed states to expand the number of businesses that would be required to register to collect sales taxes by adding an “economic nexus.” This enabled state governments to enact legislation or adopt regulations defining the threshold levels at which out-of-state businesses could sell to in-state residents after which businesses with no physical nexus in that state would be treated as meeting the nexus requirement to register to collect and remit sales taxes.

When you factor in state, county, and local sales taxes that may apply, there may be 10,000 jurisdictions in America. To comply with every one of these sets of laws and regulations is proving to be increasingly onerous on every single business in the U.S., not just rare coins and precious metals dealers. There are a handful of companies that offer software for a fee to help businesses comply with the complexity of this burden, but none of them have yet been able to accurately calculate whether sales tax applies to each sale, much less always calculating the accurate tax rate.

Relief from the complexity of the “economic nexus” standard permitted by the South Dakota v. Wayfair, Inc. Supreme Court case will almost certainly require federal legislation. It happens that the Industry Council for Tangible Assets (ICTA), the national trade association for coins and precious metals bullion dealers, has been one of the more active organizations providing Congressional input on this issue.

If you would like to know the answers to the above questions or seek guidance on where to find the answers, members can contact ICTA. If you are not yet a member of ICTA, you can help them better represent the industry by joining. Go to https://www.ictaonline.org/join-icta to join soon. The business you save could be your own.

By the way, ICTA has a temporary new member incentive: Join ICTA between now and Sept. 30, 2020, and get your membership extended through the end of 2021. Type “NUMISMATICNEWS” in the “Referred By” field on the new member application to redeem this offer at https://www.ictaonline.org/join-icta. That is three months free—but hurry, this offer ends soon.

(Full disclosure note: I have served on ICTA’s board of directors since 2002 and also as its treasurer from 2002-2019. I continue to volunteer my time to work on ICTA’s efforts seeking to gain additional rare coins and precious metals bullion sales tax exemptions in the handful of states that do not yet have such exemptions.)

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