How Should Companies Manage Wayfair Changes?
February 21, 2020
This segment takes a look at how, with the help of experts, to negotiate state and local tax issues such as nexus and apportionment.
In addition to getting a handle on the taxability, intentional exemptions, you also need to know how your sales are going to be sourced. While it's very easy to source things such as sales of tangible personal property in most instances. Many items such as services and intangible items, such as software are much more difficult to source. And states again have different provisions and how they're going to treat those items. Some other things to keep in mind are, you may need to expand your exemption certificate management software, whereas previously if you were only collecting tax in unlimited number of States, you may have only had to worry about the exemption certificates for a small number of customers. However, now if you're going to be filing sales taxes across the country, you may need to start tracking a great deal more of your customers exemption certificates and make sure you're collecting them.
And those exemptions certificates, again, like many areas across state lines can vary greatly as far as what a state will accept or not accept as proper documentation. Finally, this has all been focused on the sales taxes. Don't forget about use taxes. There's a lot of software providers out there that will help you with your sales tax accrual or your sales tax decisions, but they may not be set up as well for use tax decisions. Once you've gone through and decided on where you should be filing and decided on the taxability or products, you may determine that you have exposure going back much further than you thought.
Even if your exposure only goes back based on Wayfair, that's at least a year now. There are several ways you can look at to remediate these items. One is to approach the state with a voluntary disclosure. States also occasionally run amnesty programs, or in some states you may decide that the exposure is so minimal that you may just want to register and file prospectively and you're willing to take the risk on any prior amounts due. Maybe there are minimal invests in comparison to how much you owe overall, and it's just one of those business decisions you need to take into account. In any case, gathering the information is really where you need to start to make sure you can make the proper informed decisions.