The document discusses eCommerce sales tax compliance in the US. It notes that 45 states impose sales tax and there are over 12,000 tax jurisdictions, making compliance complex. The 2018 South Dakota v. Wayfair Supreme Court decision established economic nexus, requiring companies to collect sales tax based on sales volumes rather than physical presence in a state. Economic nexus obligations are expanding rapidly as states set different sales amount thresholds triggering requirements. The document advises companies to review operations, register for sales tax in new jurisdictions, and ensure correct tax treatment of products to maintain compliance given changing regulations.

1. eCommerce and US Sales Tax
- why companies are automating
Sacha Wilson - Director Tax Technology Solutions EMEA

2. About Avalara
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SUPPORTING
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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. A handful of Avalara customers

4. US
Sales Tax
Compliance

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
12,000
different tax
jurisdictions
across the US

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. 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. 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. • Overturned Quill Corp. v. North Dakota decision of 1992
• Court concluded that “the physical presence rule of Quill is
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. 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. As of 17th January 2019

12. International
Tax Trends

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. 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. Next
Steps

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. • 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. • 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. Do nothing…

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

22. Thank you
sacha.wilson@avalara.com