Be afraid. Very, very afraid……
I have actually seen party plan company owners give up because they were afraid of sales tax!
Yes, really! They quit….
Registering, collecting, filing/reporting and submitting the appropriate tax to the state(s) in which the company has a physical presence is a no-brainer. You always want to keep your own house clean.
The questions for direct selling companies are:
- Should we tax any sales outside of our “home” state (nexus = broadly defined as physical presence)?
- If so, which state tax laws apply?
- If we have consultants/distributors in states other than our own, what do we do about sales taxes?
- How do we manage all of the requirements for registration, reporting, filing, collecting and paying taxes in all of the jurisdictions in the country??
This confusion has existed for a long time, and different experts have different opinions about how to deal with remote seller sales tax.
I won’t attempt to explain the complexities around sales and use tax, but I will give you some hope that you can find a solution that works for your company.
The comments herein are just my opinion – I’m neither a tax professional, an attorney nor a CPA.
BAD NEWS: The burden on small businesses to comply with all state tax laws is incomprehensible. Forty-five states have laws that require sellers to collect, report and submit taxes. Small companies cannot afford to comply.
GOOD NEWS: The Marketplace Fairness Act of 2015 gives some protection to small companies (those with $1,000,000 or less in annual sales).
The Marketplace Fairness Act of 2015 has not been enacted, and it may never be enacted. The intensity for state/local governments to collect tax from remote sellers is relentless, however. A time will come when laws around sales tax and remote sales are in place and companies that fail to comply are in deep tax trouble.
If you’re a small company or just starting out, all of the above is good news. You really have nothing to fear about selling nationwide. All of the versions of federal sales tax laws and acts have provisions to protect small companies.*
If you’re a larger company exceeding $1M in revenue annually, all of the above is good news to you, too. Affordable technology to simplify sales tax requirements is available today that was not available (or was ridiculously expensive!) just a few years ago.
As I’m not a tax professional, I can’t tell you what you should do for your company, but I’ll do so anyway:
- Learn about the Marketplace Fairness Act — Marketplace Fairness Act
- Learn about the Streamlined Sales And Use Tax Agreement — SSUTA
- Talk with your company’s financial adviser and determine how to handle sales tax for your company
- Contact Easy Party Plan and see how even our most basic party plan software can help you manage your sales tax today, and learn how to protect yourself from the inevitability of mandatory sales tax compliance in the future – Learn More Here
*While you may actually owe sales taxes in states where you have sales, federal law does not compel you to collect and pay taxes in all states. Your monthly/annual cost to manage sales tax is very likely greater than the sales tax that you collect!
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