The Risky Business Of Navigating Online Sales Tax For Merchants

The Risky Business Of Navigating Online Sales Tax For Merchants

Posted on September 3, 2019

Consumers are flocking to eCommerce, and more than 230 million U.S. consumers are expected to be shopping online by 2021. Merchants are eagerly striving to be selected to fulfill consumers’ purchasing needs and to stand out from an increasingly crowded eCommerce field. There are already more than 2.5 million sellers active on Amazon, for example, and more joining every day.

Merchants working to expand and sell online in more markets must comply with each market’s local sales tax regulations, however, and that is an increasingly complicated task. Levy laws can vary widely between states, with one state taxing a product that another does not, for example.

States today are also continuing to draft their own laws regarding remote, online sales and some recently issued policies that appear likely to clash with those of other states. This creates an ever-shifting sales tax landscape in which merchants and their marketplaces must stay on their toes and be ready to adjust to each new compliance change.

The new Next-Gen Sales Tax Tracker dives into the complicated, still-unfolding eCommerce sales tax environment, the impact that such complexity has on sellers and online marketplaces and efforts to reduce compliance pain points.

Around The Next-Gen Sales Tax World

New online sales taxes aren’t just the dominion of the U.S. Recently, France issued a new 3 percent levy on earnings businesses make from French customers through digital ads or online marketplaces. The law sparked a flurry of questions from retailers confused over its details, while eCommerce giant Amazon strove to duck the law entirely by passing on the costs through a 3 percent fee increase on the online marketplaces’ French sellers.

U.S. merchants may also be feeling new pains when selling to Kansas. The state broke with the norm that many other states had set when it decided not to include a small business exemption in its economic nexus policy. While many states vary over what they define as “small,” most include some sort of “safe harbor” provision. Even Kansas state officials have questioned whether the new law’s lack of exemption is constitutional.

Even SMBs in states that do offer tax exemptions may still face new compliance requirements, such as obligations to notify and report sales to residents. Many SMBs are turning to tax software to help them navigate these kinds of compliance needs, with one report stating that many small retailers expect to spend up to $40,000 on such purchases.

Find all the latest headlines by downloading the Tracker.

Sales Tax Complexities Shape eCommerce Sellers’ Business Decisions

Merchants and the marketplaces that serve them must carefully consider how to be compliant with each markets’ sales tax regulations — and these kinds of considerations are even influencing where and what they decide to sell, according to Ted Hettich, chief sales officer of U.K.-headquartered online shopping marketplace Fruugo. In this month’s Feature Story, Hettich explains how platforms can help ease their sellers’ sales tax struggles and how eCommerce tax policies influence business strategies of both sellers and marketplaces.

Read the full story in the Tracker.

Deep Dive: The Unfolding Legacy of South Dakota v. Wayfair

The Supreme Court’s 2018 South Dakota v. Wayfair ruling unleashed a flurry of new tax policies across the U.S. The court case overturned a 1992 ruling to now permit states to tax sales to their residents from out-of-state sellers, even if those sellers did not have physical local presences. States thus empowered in the aftermath of the Wayfair decision have been passing their own, customized versions of such economic nexus laws.

Some states are currently still drafting such laws or refining already implemented ones, and businesses are working to keep up with all the changes so that they can remain compliant. This month’s Deep Dive explores the Wayfair ruling and its continued impacts on sellers, marketplaces and states. It also examines the frictions and opportunities introduced by the decision.