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By: Ted Sutton, Esq. There are some promoters out there who claim that they have a trust strategy whereby the trust avoids paying income taxes. But recent IRS rulings have started to crack down on this practice. The most recent ruling came from Chief Counsel...
By: Ted Sutton, Esq. A security refers to an ownership interest in a business or a financial instrument. These ownership interests can be in a private LLC, or corporation, or in a publicly traded stock or bond. There are two choices for holding ownership interests in...
By: Ted Sutton, Esq. Marissa was an aspiring barista who lived in New York City. After she graduated high school, she started her own coffee shop in Brooklyn. She properly formed a New York LLC. However, she forgot to report her beneficial ownership information to...
Businesses With E-Commerce, We’re Talking To You
What You Should Know About Internet Sales and the South Dakota v. Wayfair, Inc. Case
Sales tax policy has changed dramatically within the past year, thanks to the Supreme Court ruling of South Dakota v. Wayfair, Inc. The Court overruled a ‘physical presence’ rule that prevented states from taxing remote sales, such as internet purchases. The standard now is ‘economic nexus’, or how much is sold into a state whether there is a physical presence (i.e. stores or employees) or not. Given the rapid increase of e-commerce within the past decade, this ruling will have a monumental impact on state sales tax revenue in the near future. It will also require all online sellers to collect and remit sales taxes to states across the country.
In December of 2017, the U.S. Government Accountability Office (GAO) released a report which estimated that only 14%-33% of online marketplace transactions are subject to sales tax. Under the Wayfair ruling, states should see a large increase in their sales tax revenue once states start taxing online purchases.
The Wayfair ruling has resulted in a snowball effect, where state legislatures have acted quickly to implement remote sales taxation. In 2017, only nine states had remote taxation laws. By the end of 2019, that number will swell to 31 states. By 2020, there is a possibility that all 50 states will have remote taxation laws.
If you sell anything over the internet this new standard affects you and your business. It is important to note that each state will allow exemptions to smaller out-of-state sellers, with most states exempting remote sellers with fewer than $100,000 in sales or fewer than 200 transactions in the previous calendar year. But some states hold that once you cross their threshold you must start collecting their sales tax the very next day.
Given how technology has grown rapidly and sales tax collection has not, the Wayfair case will be a benchmark as it will inevitably bridge the gap between the two.
In other related developments, Ohio now allows taxpayers to pay any taxes with bitcoin, with other states considering cryptocurrency payment options. Chicago now taxes streaming services such as Netflix and Hulu. Iowa is beginning to tax digital products, such as digital audio, digital books, and pay television. Iowa also taxes personal transportation services such as Lyft and Uber.
As tax policy is ever changing, we will keep you updated on future developments.
By: Ted Sutton, Esq. There are some promoters out there who claim that they have a trust strategy whereby the trust avoids paying income taxes. But recent IRS rulings have started to crack down on this practice. The most recent ruling came from Chief Counsel...
By: Ted Sutton, Esq. A security refers to an ownership interest in a business or a financial instrument. These ownership interests can be in a private LLC, or corporation, or in a publicly traded stock or bond. There are two choices for holding ownership interests in...