We all go to work to make our lives and the lives of our families better. It feels so good to know that you are accomplishing that goal. If your goal is to expand your business by working in a different state or territory, there are few things you need to think about.
Most people know about the Wayfair case. Lately I have been getting a few questions about what the case means for different businesses. Here are the cliff notes:
Wayfair case. States now have the power to require companies to register to collect sales or use tax even if the company has no physical presence in the state. That’s right, you may be required to register to collect sales or use tax from your customers, even if you have no physical presence, i.e. employees, representatives, independent contractors working on your behalf, property, inventory, or equipment in a state. That is a BIG shift.
What does Wayfair mean for contractors or anyone who has physical presence in a state? Nothing! If you have nexus in a state due to physical presence or because you meet the definition of “doing business in a state,” etc., your duty to register is unchanged. You had a duty to register before the Wayfair case.
Rule of Thumb: Your company has physical presence if you have employees- including employees that work at home, agents, salesmen, company trucks, inventory etc. in a state. Refer to the rules regarding nexus in each jurisdiction to determine if you have an obligation to register to do business in the state.
What does Wayfair mean for companies that have no physical presence in a state? It means you must refer to the remote seller rules for each state in which you have sales to determine if you have a duty to register. Most states have passed laws that require remote sellers, i.e. companies with no physical presence, to register to collect and remit sales, use, or gross receipts tax. The registration requirement is usually based on the level of sales, number of transactions, or both. The rules vary from state to state.
If your company is required to register, you have a responsibility to understand taxability rules and comply with them. Rules vary by jurisdiction.
Growth is a great thing! Your responsibility to plan for it has been heightened. Plan responsibly and enjoy the fruits of your labors.