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EBE 2019 - eCommerce and US Sales Tax – why companies are automating

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Sacha Wilson
Director, Tax Technology Solutions EMEA Avalara

If you sell to customers in the US, get prepared for the major tax changes taking effect across the United States. The Supreme Court ruling in South Dakota v. Wayfair Inc, is only the beginning of a wave of change impacting companies that sell crossborder in the US. Get the latest updates and learn how companies are turning to tax technology solutions in their ecommerce checkouts, billing systems and ERPs to automate compliance.

Sacha Wilson is Avalara’s Director, Tax Technology Solutions EMEA, whose team helps businesses of all size automate the complexities of global tax compliance. Sacha’s background in business development and ecommerce spans over 20 years and covers blue-chips such as Amazon and Arcelor-Mittal as well as several dotcom start-ups. During 11 years at Amazon he launched and grew a number of programmes including Amazon’s Marketplace, Fulfilment by Amazon, Amazon Pay and Product Ads. He brings a depth in understanding of ecommerce and the tax issues facing European businesses involved in global trade.

Published in: Economy & Finance
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EBE 2019 - eCommerce and US Sales Tax – why companies are automating

  1. 1. eCommerce and US Sales Tax - why companies are automating Sacha Wilson - Director Tax Technology Solutions EMEA
  2. 2. About Avalara COVERING 193C O U N T R I E S SUPPORTING 25,000+ COMPANIES G LO BA L LY MORE THAN P R E - B U I L T INTEGRATIONS 7 0 0 15 O F F I C E S A C R O S S CONTINENTS 4 Disrupting the status quo of global tax management since 2004 Provide a fast, easy and accurate way to manage transactional tax calculation, registrations and filing Our cloud-based tax automation helps businesses of all sizes to: Achieve Compliance Reduce Risk Streamline Processes
  3. 3. A handful of Avalara customers
  4. 4. US Sales Tax Compliance
  5. 5. Although Alaska and Montana do allow localities to charge local sales taxes! What is Sales Tax? As an indirect tax (a tax levied on goods and services), sales tax requires the seller to collect funds from the consumer at the point of purchase. 45 states now impose a sales tax 5 states do not have a state-wide sales tax: New Hampshire Oregon Montana Alaska Delaware 12,00 0different tax jurisdictions across the US
  6. 6. Just how complex is Sales tax? VAT A few examples from New York: US Sales Tax Domestic VAT rate until distance selling threshold Rates tables can be configured in many platforms for basic VAT calculations Many platforms do not cover: • Distance selling threshold management • Place of supply • Sell digital good/services • Triangulation • 12,000+ tax jurisdictions • Changing boundaries • Differing rules in various states Technology is required to get this right! Taxable ? Non-Taxable • Bicycle gloves • Shower caps • Shoulder pads for ladies clothing • Walking boots • Sweat bands • Gloves for gardening, ski, tennis • Swimming caps • Shoulder pads in sports gear • Hiking boots • Headbands not designed to absorb sweat To be compliant, you need to know the correct classification of an item in each state to ensure you collect and remit the right amount of tax.
  7. 7. 7450 Leyden Street Total Sales Tax: 9.25% COLORADO STATE: 2.90 % ADAMS COUNTY: 0.75 % COMMERCE CITY: 4.50 % SCIENTIFIC & CULTURAL: 0.10 % DENVER AREA TR: 1.00 % 7452 Leyden Street Total Sales Tax: 4.75% COLORADO: 2.90 % ADAMS: 0.75 % SCIENTIFIC & CULTURAL: 0.10 % DENVER AREA TR: 1.00 %
  8. 8. Having a physical presence of offices, warehouses, employees, goods, etc 1 Employees travelling in certain states on business 2 Attending tradeshows or advertising in the US 3 Storing inventory in a warehouse (incl. third party) 4 Examples of Physical Nexus and Sales Tax obligations 5 Licensing software for use in certain states
  9. 9. • Overturned Quill Corp. v. North Dakota decision of 1992 • Court concluded that “the physical presence rule of Quill unsound and incorrect.” • The Supreme Court ruled in favour of South Dakota • Economic Nexus = sales tax collection obligation imposed on a seller once a state set level of economic activity is exceeded. June 2018 - South Dakota v. Wayfair, Inc. • South Dakota proposed a sales tax obligation on any remote seller with either: • $100,00 in sales, or • 200 separate transactions into South Dakota • Applies to any seller (both on-line and off-line) and all types of products and services.
  10. 10. Economic Nexus expands at rapid rate • Like most sales tax laws, economic nexus criteria varies by state • Some based on gross sales, some retail sales, thresholds can be $100k upwards
  11. 11. As of 17th January 2019
  12. 12. International Tax Trends
  13. 13. International Tax Trends • UK + Germany will hold Marketplaces jointly liable for unpaid VAT • Holding stock in foreign fulfilment centres creates VAT obligations • US - increased pressure on Marketplaces to divulge seller information Market- places Brexit • How will it affect VAT? – Distance Selling? – Intra Community? • Customs/import duties? • New trade deals with EU, US, China, etc?
  14. 14. Submit returns & Electronic data Taxpayer Submit VAT returns Digital invoice seals Govt. software digital invoice seals 4 day Invoice data Govt. calculates VAT & invoices Govt. Collects Invoices & Creates draft return Self assessed Government assesses Transactions Real-time Move to Digital • Reduce VAT GAP • Reduce fraud • Reduce errors • Improve communications from Tax Authorities • Increase Tax Revenues
  15. 15. Next Steps
  16. 16. • Study up on the business activities that may trigger a nexus connection • Have a plan in place to monitor your business activities and when they may trigger nexus • Review state tax authority laws to ensure you understand jurisdictional nuances
  17. 17. • Register to start collecting sales tax in the new jurisdiction • Ensure the right taxability of your products • File the right forms to each tax authority with the right frequency / payment
  18. 18. • Determine your tax exposure in the neglected taxing jurisdiction • Decide on the best course of action to become compliant. May require backfiling of missed returns, or participating in a voluntary disclosure agreement to enable your business to move forward with the state.
  19. 19. Do nothing…
  20. 20. • Assess business operations and commercial activities • Outlines sales tax obligations state by state • Recommendations to register based on each state’s legislation, incl. Voluntary Disclosures, AvaTax US Nexus Study / Registrations Global VAT Review • Team of EU based VAT experts • Review your global business to determine VAT obligations • Managed VAT Registration & Returns service • VAT compliance software
  21. 21. Thank you sacha.wilson@avalara.com

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