{"id":430,"date":"2018-07-14T02:11:49","date_gmt":"2018-07-14T06:11:49","guid":{"rendered":"https:\/\/www.saudercpa.com\/blog\/?p=430"},"modified":"2018-07-06T17:13:25","modified_gmt":"2018-07-06T21:13:25","slug":"the-changing-landscape-of-sales-taxes-segment-ii","status":"publish","type":"post","link":"https:\/\/www.saudercpa.com\/blog\/2018\/07\/14\/the-changing-landscape-of-sales-taxes-segment-ii\/","title":{"rendered":"The Changing Landscape of Sales Taxes (Segment II)"},"content":{"rendered":"

The Changing Landscape of Sales Taxes (Segment II)<\/strong><\/p>\n

By Jacob M. Dietz, CPA<\/p>\n

The Wise Steward<\/strong><\/p>\n

Let\u2019s suppose Justin owns a business where he sells most of his various products online. The only state in which he has a physical presence is Pennsylvania, and in the past, he has only been collecting sales tax for Pennsylvania. While eating lunch one day, he receives a call from his accountant Reuben regarding the South Dakota v. Wayfair, Inc<\/em>. Supreme Court case.<\/p>\n

Justin questions him about whether he will need to file sales tax in South Dakota. His accountant Reuben inquires of Justin how many transactions pertain to South Dakota, and how many dollars do the transactions total annually? Reuben asks these questions to help determine if Justin\u2019s business meets an exception.<\/p>\n

As Justin chews another bite of hamburger, he suddenly realizes that he doesn\u2019t know the answer to any of these questions. To make matters worse, he is not sure how to get answers without spending hours looking at invoices. Justin realizes that he should upgrade his information-gathering on sales, and he asks Reuben what changes could be made to his accounting system to start tracking these changes. Together they develop a plan to track product sales to various states.<\/p>\n

After reviewing the specifics of Justin\u2019s business, Justin and Reuben realize that in the future, Justin will need to collect and remit South Dakota sales tax. Justin realizes that charging sales tax will likely come as an effective price increase to his customers, although the extra money is going to the government instead of staying with him. His accountant Reuben advises him to save up some extra cash so that he has sufficient working capital to weather a slight downturn in sales.<\/p>\n

Although sales take a slight dip, most of the customers still buy Justin\u2019s products even though he is collecting and remitting sales tax.<\/p>\n

Two years pass. Out of the blue, South Dakota audits Justin. Reuben helps Justin navigate the audit. South Dakota lets Justin go with no additional taxes or penalties because he faithfully collected and remitted sales.<\/p>\n

The Oblivious Businessman<\/strong><\/p>\n

On the other hand, suppose Justin\u2019s competitor, Kaden, runs a business very comparable to Justin\u2019s, and it is 30 miles away. As Kaden ate lunch one day, he saw an article about the Supreme Court Wayfair <\/em>decision. Kaden does not like to read about boring court cases, so he finds another article to educate himself while eating his hamburger. Unfortunately, no one calls Kaden and warns him that the sales tax environment is changing.<\/p>\n

Kaden also sells into South Dakota, and he should start collecting and remitting sales tax, based on the specific facts of his business. Kaden, however, has a clear conscience because he does not realize he should be collecting and remitting sales tax. He is quite pleased because he sees a slight uptick in sales. Although he does not realize the reason, some customers that formerly bought from Justin\u2019s business switched to Kaden\u2019s business because Kaden is now cheaper since Justin started collecting sales tax.<\/p>\n

Two years pass. Out of the blue, South Dakota audits Kaden. Unfortunately, they find that he should have been collecting and remitting sales tax. Unlike Justin, Kaden did not collect the sales tax that he owed. If South Dakota forces him to pay the sales tax now, it directly affects his profitability. Furthermore, if they charge interest and penalties, that would decrease his profitability even more. Although Kaden was unaware of the danger, nevertheless he still suffered because he passed on without realizing the danger and taking steps to avoid it.<\/p>\n

Complexity<\/strong><\/p>\n

There are thousands of sales tax jurisdictions in the United States, and the jurisdictions do not always follow the same rules regarding taxability. Furthermore, the same type of item may be taxable or not taxable depending on the situation. Pennsylvania charges sales tax on some labor, but not other labor. If you are uncertain if your product or services are subject to sales tax, consider seeking help. It would be better to start collecting and remitting now, if necessary, than to get audited later and learn then that you should have been collecting and remitting. Foresee the danger and take steps to protect your business.<\/p>\n

This article is general in nature, and does not contain legal advice. Please contact your accountant to see what applies in your specific situation.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Changing Landscape of Sales Taxes (Segment II) By Jacob M. Dietz, CPA The Wise Steward Let\u2019s suppose Justin owns a business where he sells most of his various products online. The only state in which he has a physical presence is Pennsylvania, and in the past, he has only been collecting sales tax for … Continue reading “The Changing Landscape of Sales Taxes (Segment II)”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/430"}],"collection":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/comments?post=430"}],"version-history":[{"count":1,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/430\/revisions"}],"predecessor-version":[{"id":431,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/posts\/430\/revisions\/431"}],"wp:attachment":[{"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/media?parent=430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/categories?post=430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saudercpa.com\/blog\/wp-json\/wp\/v2\/tags?post=430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}