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Thank you - this is useful information. This seems like something that would have a very low rate of compliance presently, is that right?

• tzs 8y ago
  I have no idea what the compliance rate is. I suspect that it various a lot depending on the state. For these states I suspect that it is higher than for other states: Arkansas Georgia Indiana Iowa Kansas Kentucky Michigan Minnesota Nebraska Nevada New Jersey North Carolina North Dakota Ohio Oklahoma Rhode Island South Dakota Utah Vermont Washington West Virginia Wisconsin Wyoming a merchant can register with all of them at once by going through the Streamlined Sales Tax Project, an agreement between the aforementioned states to cooperate on this. A key aspect of the SST stuff is that if you agree to collect tax for ALL of those states, the states will pay the costs for you to use a third party service provider to calculate and track taxes and handle the required per state reports. The supported third party providers at this time are Accurate Tax, Avalara, Exactor, Sovos, TaxCloud, and Taxify. I suspect that a common pattern for merchants, especially small merchants, will be to go through SST and collect for all those states, and deal with the rest on a case by case basis. Note that all of those third party providers working with SST do provide tax services for non-SST states, but not for free. For the big non-SST states, like California, it will probably be worth it (California's law requiring collecting tax kicks in 2019-04-01). For small states, I suspect a lot of small merchants might just stop selling in them. I think that a lot of the non-SST states will be joining SST. I know that many of them have in their laws or policies statements that they agree with the principles of SST...I think some just haven't worked out the details yet. For the non-SST states, a lot will also depend on which third party provider one is using for SST. With TaxCloud [1], for example, you can have them handle a non-SST state for 0.5% of sales in that state (that's for small merchants...the rate is lower for bigger merchants). That's not too bad, and the pain is the same regardless of whether the state is huge or tiny. For some other providers the cost structure is typically a per transaction cost (e.g., $N for M tax API calls per month) plus whatever it costs for the state filing fees to file tax reports, and so if you aren't making a lot in a state that filing fee can kill you. You'll need to be a lot more selective. There's another aspect of having to collect tax that is annoying. Tax depends on location, and tax boundaries do not line up with zip code boundaries. To lookup the right tax you will now have to ask for full address information, even if you are not shipping anything. Before all you needed was zip, to help reduce credit card fraud (and that is actually optional). It would really really really make things nicer if Congress would step in and pass a law that says that IF states require out of state merchants to collect sales tax, the tax MUST be a function of 5 digit zip code. Then merchants would only need a simple look up table with under 50000 rows to determine the tax. We wouldn't need any real-time APIs for our shopping carts to use to look up tax rates from third parties, simplifying tax handing in our carts. We'd just need to use the SST third parties after the sale to record the tax for reporting, which I believe they all provide APIs for (to cover non-online sales). Right now, there are places where the tax varies by building within a block. It is vary irritating. [1] I generally use TaxCloud for examples because they are the best at making information available on their site to the general public. The others tend more toward making you sign up, or making you actually talk to someone, to get details.