Monday, October 08, 2012

Managing Nationwide Sales Taxes

In an article entitled "Online Sales Tax Will Create Ecommerce Chaos" in Multichannel Merchant (Oct. 8 online), Steve DelBianco, Executive Director of NetChoice, warns that pending federal legislation that would allow states to require online retailers to collect sales tax on all sales nationwide is "a nightmare coming your way."

We've written about this before, and cited  the 1992 Supreme Court decision, Quill Corp. vs. North Dakota, which said states are not allowed to require out-of-state companies to collect sales taxes unless that company has a physical presence, such as a store or warehouse, in the state.

All this is well known in the industry, and the pending legislation is meant to supercede this case.

To simplify sales tax collection, DelBianco urges:
  1. a single tax rate per state for remote sales
  2. a single set of definitions for state tax liabilities
  3. a common sales tax return for all state
  4. software for rates, filing, and payment
  5. and compensation for tax collection.
The first three are excellent suggestions. The fourth has been available for more than 20 years, with new players coming along all the time. And Number 5 is baffling to me: compensation for the cost of doing business? What am I missing here? Where is the logic in that?

Anyway, for systems to manage sales and use tax collection in the direct commerce environment, see:

Vertex: the Big Fish in this pond, pricey but full-featured
Avalara: whose Avatax system suite has been gaining a lot of ground in the last few years
CCH: whose CorpSystem Sales Tax solution is a SaaS-based application
GovOneSoultions: Taxware

All provide filing services for every jurisdiction in the U.S., with full support for tax rates at the municipal, county, and state levels (or local equivalents), tax holidays, and so on.


Unknown said...

Good response, though your listing of options for compliance at the end overlooked TaxCloud - the only option that is completely FREE for retailers.

Ernie Schell said...

Thanks for the addition. I appreciate it!

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