New Sales Tax Rules

[pendennis]

It could be, as Randy Moe states, that the limit on sales tax liability is limited to the states' governments, not down to the county, city, etc., level.

The Supreme Court case was specifically about the State of South Dakota v. Wayfair and others. In its ruling, the Court mentions 10,000+ sales tax jurisdictions in the U.S., and cites some of the minutiae that covers taxable v. nontaxable sales. However, in the parts of the ruling I read, the Court doesn't mention the ability of "sub-state" jurisdictions to force retailers to collect sales/use tax on their behalf.

I noted that the dissenters bemoaned the broad expansion of the Commerce Clause, and that e-commerce was not a radical departure from the current models.

[pendennis]

Many dealers in CA, and other states, run special sales days where the dealer pays the tax, not the consumer. So now that mail order dealers will start collecting sales tax on out of state shipments where they do not have a physical presence will these tax free days end?

The retailers can't run specials where only the dealer pays the tax, unless there's a specific sales/use tax holiday granted by the taxing jurisdiction.

These are marketing/sales ploys to give an additional percentage off the sales price, and call it a "dealer pays the tax" sale. However, the dealer is always on the hook for the sales tax. Dealers are the collection agents for the government.

[Bob Salomon]

The retailers can't run specials where only the dealer pays the tax, unless there's a specific sales/use tax holiday granted by the taxing jurisdiction.

These are marketing/sales ploys to give an additional percentage off the sales price, and call it a "dealer pays the tax" sale. However, the dealer is always on the hook for the sales tax. Dealers are the collection agents for the government.

That may be true, but dealers still do it. And not all on the same days in the same areas.
Many times these tax free sales are run at trade shows.

[pepeguitarra]

Technically, it is not called sales tax. If purchased in California, yes, it is sales tax. If purchase outside California, it is called USE TAX. Which is the same thing, but with different name. In fact, if you do not pay use tax for your purchases, when you do your income tax, you have to declare what you bought over $1,000 and pay the tax then. For those who purchased less than $1,000 items, there is a formula that the State uses to calculate your use tax. California is the most taxed State in the US.

[Bob Salomon]

Technically, it is not called sales tax. If purchased in California, yes, it is sales tax. If purchase outside California, it is called USE TAX. Which is the same thing, but with different name. In fact, if you do not pay use tax for your purchases, when you do your income tax, you have to declare what you bought over $1,000 and pay the tax then. For those who purchased less than $1,000 items, there is a formula that the State uses to calculate your use tax. California is the most taxed State in the US.

Unless you live in a state without a state income tax, TX, for example. But you might still be liable to pay sales tax.

California is among the highest taxed states. It has a very low property tax. Try NY or NJ for highest taxes.
But outside the states with no sales tax or income tax CA is in the states with the highest total taxes.

[MikeH]

Although I live in California, I'm not a sales tax expert. But, I did receive a communication from the California Sales Tax people (CDTFA, formerly the Board of Equalization) that made it sound like they were going to acquiesce with the Supreme Court Wayfair decision, for now, with no change in CA law.

So, what they appeared to do, is to apply the $100,000 / 200 transaction minimum, to what are called Districts.

California Sales Tax law, as it currently exists, would never pass the "simplicity" test in Wayfair. However, applied by District, it probably would. A "District" is any county, *or* any city or cities, or group of counties, that has passed a sales tax that gets added to the State rate (which is actually 3 rates... most of it goes to the State, but the County and City where the sale takes place already gets about 20% of the tax). Probably the best known "District" is BART, i.e. Bay Area Rapid Transit, which, at one time, had a sales tax rate of 1/2/%.

So, if I'm B&H, I have the option of:
a) collecting only in the districts where my sales exceed the limit, which would probably exclude most of the smaller counties, and then try to figure out how to explain this to my customers, or;
b) Collect from everyone in California. If I were in their shoes, b) is the obvious answer.

Sooner or later, CA will need to re-write their Sales Tax laws, because their manner of acquiescence means that many smaller and medium-size retailers will still not need to collect.

[Bob Salomon]

Although I live in California, I'm not a sales tax expert. But, I did receive a communication from the California Sales Tax people (CDTFA, formerly the Board of Equalization) that made it sound like they were going to acquiesce with the Supreme Court Wayfair decision, for now, with no change in CA law.

So, what they appeared to do, is to apply the $100,000 / 200 transaction minimum, to what are called Districts.

California Sales Tax law, as it currently exists, would never pass the "simplicity" test in Wayfair. However, applied by District, it probably would. A "District" is any county, *or* any city or cities, or group of counties, that has passed a sales tax that gets added to the State rate (which is actually 3 rates... most of it goes to the State, but the County and City where the sale takes place already gets about 20% of the tax). Probably the best known "District" is BART, i.e. Bay Area Rapid Transit, which, at one time, had a sales tax rate of 1/2/%.

So, if I'm B&H, I have the option of:
a) collecting only in the districts where my sales exceed the limit, which would probably exclude most of the smaller counties, and then try to figure out how to explain this to my customers, or;
b) Collect from everyone in California. If I were in their shoes, b) is the obvious answer.

Sooner or later, CA will need to re-write their Sales Tax laws, because their manner of acquiescence means that many smaller and medium-size retailers will still not need to collect.

Like I said, I'm not a CA Sales tax expert. There's a lot more to this, but it starts getting political, so I'm not going to even start ti go there. Suffice it to say that some of my tax friends think that the California tax people border on criminal activity from time-to-time. I've heard it referred to as "legal extortion."

Since you are a CPA this is what happened to us as a distributor of photographic and high end luggage to WA state.

Are only office was in NJ.
We had no facilities of any kind in WA.
We had no employees in WA.
We had an independent sales rep in WA and he had an employee in OR.
All samples in their possession belonged to us and were in their possession on loan, for a specific timeframe.

I would make periodic trips from NJ to WA to display new products and to train dealers or customers.

The state of WA decided that we were liable for a Tax of 0.035% on all sales shipped into WA to retail dealers who collected state and local sales tax on those products, and our rep was also liable for the tax. In addition, they demanded 5 years of back tax + interest.

Now, how does that happen? WA claimed they were doing it and that we should have made it a point to have familiarized ourselves when their legislature passed this tax.
The tax liability was not that great and to hire a tax attorney would have been far more. And we claimed it off our tax returns but our competitors, with the exact same circumstances, were not found liable for that tax. Only the companies that used that specific rep were liable for the tax.

[MikeH]

Bob:

You may not like this answer, and this is part of the complexities that the Supreme Court addressed by talking about the simplicities of South Dakota. Both WA & CA law is complex, and they use a concept of "nexus" (which is when you have legal presence in a state, and nexus for tax purposes can be different than nexus to be able to sue...), but when you are in a state for more that a certain # of days training, you have Sales Tax nexus. I'm guessing that Wayfair did not change this. Wayfair was not about physical presence in a state; rather it was about when can a state force an out-of-state company, with no nexus, to collect tax.

Although I'm semi-retired and only taking on new clients "for a good reason," this is why I always referred Sales Tax issues to CPAs that only handle Sales Tax. It's very specialized.

[Greg Davis]

Kentucky has recently started charging sales tax on internet purchases as well. We’ve had them on Amazon purchases for a while, but that is because they have several warehouse, distribution centers, and photo studios here, so the physical presence made them a “local” retailer. Now anyone in the country counts and must charge KY sales tax if the buyer is in KY.

[invisibleflash]

BH started charging me on Jan 3, 2019. CA is late.

If I was an artist I give up photography. For what I pay in sales tax on a few hundred dollar purchase, I could draw for a year or two. You have to be rich to do photography with no concerns for $$ nowadays. I had put a little order together for BH the other day. Sales tax was about $16. I canceled order, will wait and make due. Brits got to pay 20% VAT, poor Brits, feel sorry for em.