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© Copyright Avalara, 2013
David West
OEM-ISV Partner Manager
David.west@avalara.com
+1 206.826.4900 x1119
The Current Reality and Future
of Online Sales Tax
Disclaimer
I will be speaking on topics that may impact
your organization’s sales tax liabilities and
obligations.
This should not however be considered
professional Tax advice specific to your
organization.
It’s recommended to speak with a ‘certified’
sales tax professional (such as an
accountant, advocate, or attorney) for
specific questions and advice.
Federal Legislation
Increased State Enforcement
Constantly Changing
Rates, Rules, & Boundaries
Nexus
(Physical Presence)
Product Taxability
Use Tax
Filing & Returns
International
Requirements
Sales Tax Compliance: The Problem
YOU
ARE
HERE
Sales Tax Legislation
Ever changing Sales Tax regulations
• Thousands of changes annually across the U.S.
Amazon Laws
• Expanded and new definitions of NEXUS
US Federal Legislative Pending Action
• Marketplace Fairness
• Main street Fairness
• Marketplace Equity
Do you have Nexus in a given state?
States define Nexus as a ‘tangible physical presence’ which
creates the legal requirement to collect & remit Sales Tax.
Nexus triggering events are not consistent state-to-state but
can include:
Traveling and/or Remote Salespeople
Agents or Distributors
Remote Employees on Payroll
Onsite Customer Training
Trade Show Attendance
Inventory / Warehousing / Drop-Shipping
Installing / Servicing Tangible Property
Internet (and other) Affiliates
Marketplace Fairness Act
In February as part of the Budget Vote 74 Senators
approved Marketplace Fairness Act in a non-binding
vote.
It's currently supported by National Retail Federation,
Amazon, Wal-Mart, National Governors association.
In Effect overturns Supreme Court Decision Quill
Corp vs. North Dakota, and ignores current Nexus
Only exempts Companies doing under $1 million in
remote sales (out of state sales) from collecting
Studies have shown an anticipated impact on 3
million businesses if the Bill passes
The Ongoing Challenge and ‘time loss’ of Sales Tax
Nexus – What is the full scope of States where I
should collect sales tax?
Accuracy – Am I doing the calculations right?
Filing – The monthly, quarterly, never-ending
crunch!
Audits – Go pick on someone else!
The Sales Tax Challenge for Ecommerce Retailers
Calculation – For each transaction where Sales tax need be
calculated, the following must be taken into account:
– Should sales tax be applied based on Ship-To or the Ship-From address ?
– Jurisdiction Layers (State, County, City and Special Taxing Jurisdictions)
– Product specific taxability requirements ?
– Amount of the unit price and total invoice effecting tax calculation ?
– Sales tax exempt status for specific customer accounts ?
– Reporting to support the compliance process
Tax Returns – The tax accrued or collected needs to be remitted to
each state or jurisdiction:
– AP departments typically have to make a payment to each state monthly or
quarterly.
A State by State Look at Sourcing Rules
‘Sourcing Rules’ determine on which location / jurisdictions
Sales Tax should assessed for shipped items
Origin-Based States for Products (Services Destination)
• Arizona, Illinois, Missouri, New Mexico, Ohio, Pennsylvania, Tennessee,
Utah and Virginia
Mixed Source States
• California
• Counties are Origin-based; Cities & STJs are Destination-based
• Services are always Destination-Based
• Texas
• Cities and Counties are Origin-Based based; STJS are Destination-based
• Some Services are Destination-Based
Destination-Based States
• All the rest
What does it take to be Jurisdiction Accurate?
GIS based Geo-location - Not zip code only
Accuracy isn’t just about the address alone
States tax products differently depending on the
product and where that product is shipped.
Some examples of industries with varying taxability
rules:
Software / Hardware
Digital Goods
Services
Medical device / equipment
Food / Beverage
Clothing / Apparel
Dietary Supplements
And many other industries / products!
Some odd ‘product taxability’ examples:
Which is non-taxable?
Original Milky Way or Milky Way Midnight candy
bars?
Some odd ‘product taxability’ examples:
Is this bagel taxable or non-taxable in New York?
Download Adobe Acrobat 9 Pro Extended
https://www.adobe.com/downloads/
Taxable or Non-Taxable in California?
Taxable or Non-Taxable in California?
Taxable or Non-Taxable in California?
Download Adobe Acrobat 9 Pro Extended
https://www.adobe.com/downloads/
The Multi-Channel Business & Sales Tax Compliance
18
Consistency of rates and
automation across ALL
transactional Software
platforms…
The Market Options for Managing Sales Tax
Manual
• OK for simple collection requirements,
low volumes
Zip-Code Tax Tables
• Adequate, though inaccurate
Onsite Solution
• IT infrastructure, maintenance
‘Cloud-based’ Solution
• Automated via SaaS deployment
Avalara is the leading global transactional tax solution
Avalara is the leader in SaaS based transactional tax
• Chosen by over 11,000+ businesses
• Calculating more than 3 million tax computations daily
• Auto Filing more than 30,000 returns per month
• Remitting more than $14 billion in tax filings annually
• Currently tracking over 1.5 million sales tax exemption forms
• All AvaTax Calculations legally Certified as accurate by 24 states
and growing
David West
OEM-ISV Channel Manager
David.west@Avalara.com
+1 206.826.4900 x1119
http://www.facebook.com/AvalaraSalesTax
http://blog.avalara.com/
http://twitter.com/avalara

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Client Connect 2013 - Future of Online Sales Tax

  • 1. © Copyright Avalara, 2013 David West OEM-ISV Partner Manager David.west@avalara.com +1 206.826.4900 x1119 The Current Reality and Future of Online Sales Tax
  • 2. Disclaimer I will be speaking on topics that may impact your organization’s sales tax liabilities and obligations. This should not however be considered professional Tax advice specific to your organization. It’s recommended to speak with a ‘certified’ sales tax professional (such as an accountant, advocate, or attorney) for specific questions and advice.
  • 3. Federal Legislation Increased State Enforcement Constantly Changing Rates, Rules, & Boundaries Nexus (Physical Presence) Product Taxability Use Tax Filing & Returns International Requirements Sales Tax Compliance: The Problem YOU ARE HERE
  • 4. Sales Tax Legislation Ever changing Sales Tax regulations • Thousands of changes annually across the U.S. Amazon Laws • Expanded and new definitions of NEXUS US Federal Legislative Pending Action • Marketplace Fairness • Main street Fairness • Marketplace Equity
  • 5. Do you have Nexus in a given state? States define Nexus as a ‘tangible physical presence’ which creates the legal requirement to collect & remit Sales Tax. Nexus triggering events are not consistent state-to-state but can include: Traveling and/or Remote Salespeople Agents or Distributors Remote Employees on Payroll Onsite Customer Training Trade Show Attendance Inventory / Warehousing / Drop-Shipping Installing / Servicing Tangible Property Internet (and other) Affiliates
  • 6. Marketplace Fairness Act In February as part of the Budget Vote 74 Senators approved Marketplace Fairness Act in a non-binding vote. It's currently supported by National Retail Federation, Amazon, Wal-Mart, National Governors association. In Effect overturns Supreme Court Decision Quill Corp vs. North Dakota, and ignores current Nexus Only exempts Companies doing under $1 million in remote sales (out of state sales) from collecting Studies have shown an anticipated impact on 3 million businesses if the Bill passes
  • 7. The Ongoing Challenge and ‘time loss’ of Sales Tax Nexus – What is the full scope of States where I should collect sales tax? Accuracy – Am I doing the calculations right? Filing – The monthly, quarterly, never-ending crunch! Audits – Go pick on someone else!
  • 8. The Sales Tax Challenge for Ecommerce Retailers Calculation – For each transaction where Sales tax need be calculated, the following must be taken into account: – Should sales tax be applied based on Ship-To or the Ship-From address ? – Jurisdiction Layers (State, County, City and Special Taxing Jurisdictions) – Product specific taxability requirements ? – Amount of the unit price and total invoice effecting tax calculation ? – Sales tax exempt status for specific customer accounts ? – Reporting to support the compliance process Tax Returns – The tax accrued or collected needs to be remitted to each state or jurisdiction: – AP departments typically have to make a payment to each state monthly or quarterly.
  • 9. A State by State Look at Sourcing Rules ‘Sourcing Rules’ determine on which location / jurisdictions Sales Tax should assessed for shipped items Origin-Based States for Products (Services Destination) • Arizona, Illinois, Missouri, New Mexico, Ohio, Pennsylvania, Tennessee, Utah and Virginia Mixed Source States • California • Counties are Origin-based; Cities & STJs are Destination-based • Services are always Destination-Based • Texas • Cities and Counties are Origin-Based based; STJS are Destination-based • Some Services are Destination-Based Destination-Based States • All the rest
  • 10. What does it take to be Jurisdiction Accurate?
  • 11. GIS based Geo-location - Not zip code only
  • 12. Accuracy isn’t just about the address alone States tax products differently depending on the product and where that product is shipped. Some examples of industries with varying taxability rules: Software / Hardware Digital Goods Services Medical device / equipment Food / Beverage Clothing / Apparel Dietary Supplements And many other industries / products!
  • 13. Some odd ‘product taxability’ examples: Which is non-taxable? Original Milky Way or Milky Way Midnight candy bars?
  • 14. Some odd ‘product taxability’ examples: Is this bagel taxable or non-taxable in New York?
  • 15. Download Adobe Acrobat 9 Pro Extended https://www.adobe.com/downloads/ Taxable or Non-Taxable in California?
  • 16. Taxable or Non-Taxable in California?
  • 17. Taxable or Non-Taxable in California? Download Adobe Acrobat 9 Pro Extended https://www.adobe.com/downloads/
  • 18. The Multi-Channel Business & Sales Tax Compliance 18 Consistency of rates and automation across ALL transactional Software platforms…
  • 19. The Market Options for Managing Sales Tax Manual • OK for simple collection requirements, low volumes Zip-Code Tax Tables • Adequate, though inaccurate Onsite Solution • IT infrastructure, maintenance ‘Cloud-based’ Solution • Automated via SaaS deployment
  • 20. Avalara is the leading global transactional tax solution Avalara is the leader in SaaS based transactional tax • Chosen by over 11,000+ businesses • Calculating more than 3 million tax computations daily • Auto Filing more than 30,000 returns per month • Remitting more than $14 billion in tax filings annually • Currently tracking over 1.5 million sales tax exemption forms • All AvaTax Calculations legally Certified as accurate by 24 states and growing
  • 21. David West OEM-ISV Channel Manager David.west@Avalara.com +1 206.826.4900 x1119 http://www.facebook.com/AvalaraSalesTax http://blog.avalara.com/ http://twitter.com/avalara