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The South Dakota tax only applies if you sell more than $100k or send more than 200 shipments, which factored into the decision: Respondents argue that “the ph
by nolta 8y ago
The South Dakota tax only applies if you sell more than $100k or send more than 200 shipments, which factored into the decision:
Respondents argue that “the physical presence rule has permitted start-ups and small businesses to use the Internet as a means to grow their companies and access a national market, without exposing them to the daunting complexity and business-development obstacles of nationwide sales tax collection.” These burdens may pose legitimate concerns in some instances, particularly for small businesses that make a small volume of sales to customers in many States. State taxes differ, not only in the rate imposed but also in the categories of goods that are taxed and, sometimes, the relevant date of purchase. Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so.
In this case, however, South Dakota affords small merchants a reasonable degree of protection. The law at issue requires a merchant to collect the tax only if it does a considerable amount of business in the State; the law is not retroactive; and South Dakota is a party to the Streamlined Sales and Use Tax Agreement, see infra at 23.
- WiseWeasel 8y agoThat's still difficult to comply with. Imagine 50 different laws like that, each with their own tiers, and consider the difficulty accounting for them all and staying in compliance. That's not even getting into municipal taxes.
- cm2012 8y agoShopify/BigCommerce/Authorize.net/eBay/Amazon, etc. will handle it for you. Everyone uses SaaS software at some point in the process nowadays.
- jakejohnson 8y agoYes, those platforms may handle sales tax calculations automatically for you for their specific platform. That's only the very first step. Merchants will then need to report and remit their sales tax to each state. If those platforms plan to handle the entire process, trust me they have a ton of work ahead of them if they decide to handle it in-house.
- ISL 8y agoThe remittance is the key, and part of the reason that I've only ever partnered with other companies that can handle that sort of thing.
- URSpider94 8y agoNote that popular services TaxJar and AvaTax will do automated filing for you as well.
- watchdogtimer 8y agoWe don't. We're one of those mom-and-pop businesses that uses a self-hosted shopping cart, and use Braintree as our payment processor which has no sales tax recording system that I'm aware of.
- ahallock 8y agoArguments like this annoy me. Someone has it figured out so it's OK for these complex tax implementations to exist. No, it's not OK, and it's not a solved problem. We recently implemented sales tax collection using the TaxJar API combined with Stripe. It took at least a month to integrate. These integrations are huge drains on business productivity. Government has to stop creating these complex rules. Create simple rules and stop treating everyone's time with such reckless abandon.
- anonymous5133 8y agoThe problem is each government wants to make rules of their own and no one can agree to streamline. Then comes the issue with democrat and republican politics. Republicans will want low tax and little services while democrats the opposite. Good luck getting them to agree. The end result is smaller busineeses get stomped. Only solution i see is to streamline it with software. Software is getting easier to use so hopefully it becomes less burdensome.
- gist 8y agoNot to mention remitting the money to the proper place. Not a trivial matter at all.
- anonymous5133 8y agoAvalara has automated return filing.
- saugnsckuigfh 8y agoWhich is why the issue remains, as it has been since Quill, the extent of the seller's contacts with the state. If you're making $100k to each 50 states, then you've got $50 Million in Revenue and can afford to do it. If you've sold 10 t-shirts at $20 a piece, then your total sales of $200 isn't worth bothering with. If we want there to be problems we can certainly create them, but doesn't seem all that complicated if we want it to work.
- rrdharan 8y agoYou mean $5M not $50M.
- Retric 8y ago100k * 50 = 5M @ 2% profit margin that's 100k per year. Enough to live comfortably on, but not exactly a big money. Further, the ruling applies to all taxes and has no cutoff under 100k/year required.
- joemi 8y agoI'm curious where your 2% margin came from in this estimate. From what I can tell, that number is often quoted as Amazon's profit margins, but I'm not sure smaller more-specialized online retailers necessarily need to match Amazon's low margins.
- Retric 8y agoIf you are manufacturing something then the profit margins can be much higher. However, for retail 2% is fairly solid and likely above average when you include people losing money, but not outstanding.
- markdown 8y ago> If you're making $100k to each 50 states, Isn't it $100k or 200 transactions? 200 transactions is just 17 customers with a year of monthly subscription payments.
- Someone1234 8y agoThat sounds harder and more expensive for the business than simply having a standard system to collect and pay the sales tax.
- reaperducer 8y agoPaying sales taxes online for the one state where I have a business that does retail sales takes between 10 and 30 minutes, depending on how complex that quarter's sales were. Multiply by 50 states, and it's up to 25 hours a month of work. For those of you who have never done this, sales taxes are a lot more complicated than they seem. In the three states where I've had retail businesses, different types of products have different sales taxes and each has to be reported individually. It gets exponentially more complicated if your state also has use, consumption, or other retail taxes; and if it requires you to report purchases your company made out of state. If I had a popular company, even with small sales, I could easily see this becoming a week-long headache I offload onto my accountant, who will then charge me extra. So not only do I have to raise prices to include the sales tax for various states, I have to factor in the extra accounting expense.
- mikeyouse 8y agoBut if the cutoff really is $200k per state, and you really had 50 states to take care of -- You'd be looking at a minimum of $10M in annual sales. If you're a $10M company, I think one of your accountants could spare the 6 hours per week taking care of it. I've worked with a lot of small businesses so I don't mean to disparage things but this seems like a really obvious law that should be enforced.
- reaperducer 8y agoBut if the cutoff really is $200k per state That's a pretty big if. The $200k cutoff from the article is South Dakota. I've never had a business in a state that had any cutoff at all. Only sell $1 this quarter? Pay the tax.
- jonknee 8y ago
- Glyptodon 8y ago200 shipments is nothing, and $100k isn't particularly meaningful revenue, either. I don't know what kind of margins people get, but I'd guess $100k yearly revenue isn't even enough for one person to live decently, let alone afford to handle keeping up with a business.
- jonknee 8y agoIt's 200 shipments or $100k in North Dakota which would be impressive for any mom and pop eCommerce site that isn't somehow focused on ND. Almost no one lives there.
- gowld 8y ago$100K can be quite a low number, if it's revenue not profit. Consider selling 100x$1000 computers at $50 profit per each, vs 1000x$100 jewelry at $50 profit per each.
- bluepeter 8y agoTime to push those annual (vs monthly) SaaS plans I guess...