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Wayfair Decision: How will you manage your Sales Tax Compliance?

A guide to moving forward with the impact of the US Supreme Court’s decision in Wayfair.

We’re largely all in the same boat on this one, we know something big will happen as a function of overturning a 50 year old precedent defining the rules of engagement on sales tax, but when it will happen and what it will look like is still a little fuzzy.  But there are a few givens that both sides of the argument agree on and as a result, changes we know are coming.  NLB’s position for small to midsize businesses is to assess your exposure today and start developing at least the rough outline of your response.

Tax Compliance

NLB’s guidance | Tax Compliance

 

NLB’s guidance

  • Identify the total sales, total number of transactions, and product mix by state to identify where you may have the greatest tax liability by state. This would be your initial focus area.
  • Lacking any better national standard, review the product and service classifications in the SSUTA (Part II) and compare them with your current product catalog. For example, ski gloves are considered “Clothing” while protective gloves are considered “Protective Equipment.”
  • If you have a tax determination software vendor ask them to compare the product classification you are using today with that provided by the SSUTA. That will help decide the potential gap that either you or your vendor will potentially need to close.   Again, states can do what they want now, but with the threat of being found “unreasonable” in the complexity of their tax code.  So, with the dollars at stake, most will likely look at what South Dakota is doing and follow SSUTA type standardized product classifications.  If you are already selling into one of the 20 SSUTA compliant states you may have already completed this step.
  • Assess the processes or tools you use to track Exemption Certificates anticipating a big increase in exemption claims either by jurisdiction, usage, or client exemption status.
  • Now’s the hard part. Look at what your Corp IT group has on their plate for the next 24 months and make the decision as to whether you wait for each state to start passing their own South Dakota type legislation and adapt on a state by state basis as the issue arises, OR attempt to address some standardization in all of these areas now, including your own product classification.

NLB’s recommendation is that you at least size the problem now.  Regardless of your decision you will need to ultimately involve your tax software vendor and Corp IT in the solution or else you’ll be left managing the entire process in Excel.  The sooner you can begin identifying the size of the effort the sooner budgets and schedules can start to anticipate the change.

If you need some help, NLB provides services in all of these areas.  We have the technical skill to pull invoices from your ERP to help identify tax exposure by jurisdiction and tax exempt status.  We can help install or customize tax determination software and can help with the integration with your ERP.  We can even help with the tracking of the multitude of Exemption Certificates that could start coming your way.

About the Author
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Carroll Mcintire

Vice President-Client Partner

Carroll.Mcintire@nlbservices.com

732-239-7579

/ Carroll Mcintire