Sales tax: the biggest tax issue for 2019?

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Earlier in 2018 the U.S. Supreme Court handed down its anticipated decision in South Dakota v. Wayfair. The case challenged South Dakota’s application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state. Well South Dakota persuaded the Supreme Court and now it is open season on states to impose sales tax on sales where the seller has no employees or offices in the state they are selling to. Instead of providing you with answers regarding whether you might be liable to collect sales tax on sales you are making within the United States, instead I am going list questions you will first need to ask yourself.

  1. What is the sales threshold of the state my customer is in? Many states who do impose the economic nexus standard are willing to let some smaller sellers to be exempt.
  2. Is my product subject to sales tax? Perhaps New York imposes sales tax on your product, but Colorado does not.
  3. Is my customer a reseller? If you are not selling to the end user; there is no sales tax.
  4. Am I selling a service or a product? Generally, services are exempt from sales tax, check if you can unbundle your product and separate the maintenance component from the product.
  5. Where is my customer? Not only do state sales tax rates vary, but cities within that state may also add percentages to the base sales tax rate.
  6. Who is buying my product? Is the company whose address appears on the invoice my customer, or are they just processing purchases for business units in other states?
  7. Will the state I am selling to impose taxes retroactively? Many states are still deciding   on rules to apply the Supreme Court ruling.

The above questions must be asked, in order to see if the new economic nexus rules apply to you. Once you ask these questions, we can help you answer them. In short, we are in a new world when it comes to sales tax and the old nexus rules must be carefully reviewed.

The writer is the CEO and President of Philip Stein and Associates

About the Author
Philip is president and founder of Philip Stein & Associates, the largest US accounting firm in Israel, specializing in US taxation of US tax residents living in Israel, and of Israeli individuals and companies doing business in the United States. Offices are in Jerusalem, Ramat Gan and Beit Shemesh. Philip grew up on the South Side of Chicago, and graduated from the University of Illinois, followed by an MBA from the University of Michigan. Philip started his career in the tax department of what today is Ernst & Young. He has lectured at Roosevelt University, Loyal University and Northeastern University, and continued to lecture on international tax issues in Asia, Africa, Europe and North American. He is also a frequent speaker for Nefesh B’Nefesh and has advised the Israeli Treasury, Bituach Leumi and the Knesset on various tax issues affecting US citizens living in Israel. Philip’s love of radio led him to start his podcasts which have attracted tens of thousands of listeners. He continues to be an avid Chicago sports fan as well as a lover of mountain hiking, TRX, and snowshoeing (he likes to keep his feet on the ground!).
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