South Dakota v Wayfair brought up much discussion regarding sales tax reporting requirements for remote sellers. Most states have determined thresholds of sales or transactions, that if met, require an out-of-state remote seller to collect and remit sales tax. These new thresholds are a substantial change in sales tax. Furthermore, this leaves many companies trying to determine their sales tax collection requirements. That said, a company whose sales are below the threshold for remote seller nexus still might be required to abide by a state’s reporting requirements. Some states have implemented reporting requirements for remote sellers who are below the nexus threshold for sales tax collection.
Sales Tax Reporting Requirements for Remote Sellers Below Nexus Threshold
A company might be a non-collecting remote seller, but may be subject to specific reporting requirements. These reporting requirements are to its customers and the Department of Revenue. There are currently 14 states with this reporting requirement in place, some giving a threshold of sales as well. Most of these states require a written notice on customer invoices. The written notice informs the customer of their use tax obligations since the company is not required to file sales tax in that state.
Additionally, companies are required to have a notice on their website or places of advertisement and purchase places. At year-end, most states require a summary of sales to be sent to each customer, as well as a review of customer information and sales be forwarded to the Department of Revenue. This way, the customer can self-assess use tax accordingly and the Department can track down customers who do not.
Penalties and Voluntary Collection
Above all, penalties relate to non-reporting remote sellers. Companies also have the option to register, collect, file, and remit sales tax in that state voluntarily rather than abide by the reporting requirements. A few states that have reporting requirements are Kentucky, Washington, Oklahoma, and Colorado.
How DHJJ Can Help
If you believe you may have nexus or reporting requirements in another state and need further assistance, contact DHJJ at (630) 420-1360 or fill out the form below. If you’d like more information on the South Dakota v Wayfair ruling, click here to read more.