Well, well, well, I teased this out a couple of weeks ago, and the challenge has been accepted. Thought leadership, you ask? Close. Tax technical, or at the very least, relevant? Absolutely. Personality? I give him an A+.
My man (and coworker now for over nine years), Jeff Monsman, has been licking his chops, itching to get into the blogging game. As many of you know, Jeff is a very valuable resource and an extremely talented attorney in our State and Local Tax group. Over the years, Jeff and I have bonded over several sports discussions, sales tax cases, and even a few happy hours. I will also always remember exactly how long Jeff has been with the firm; not because I’m sending him anniversary cards every March, but because I was on a brief (two days, unofficially) paternity leave when I interviewed Jeff over a lunch portion of kung pao chicken at PF Chang’s.
Without stealing any of his thunder, Jeff shares a perspective of a landmark sales tax case many of us sales tax professionals discuss with our clients literally multiple times a week.
I’ll be back next week!
Where were you on June 21, 2018? Unless you got married that day, that answer is most likely “I have absolutely no idea.” If you are a sales tax practitioner, you may remember that day as one that will live in tax infamy. Of course, I am referring to the United States Supreme Court decision in South Dakota v. Wayfair, Inc. that essentially said the internet is not a fad and sales tax nexus should be based upon economic activity, not physical presence.
That should be the end of this blog post, economic presence is now the law of the land when it comes to sales tax. But this is taxation we are talking about; an industry that lives for the grey area. Instead, 25 years of Quill and the severely eroded physical presence standard was erased with the flick of a 5-4 Supreme Court decision. And the sales tax world will never be the same. Before that day, the word Wayfair was synonymous with all things home décor. After: sales tax.
While some clarity has been afforded – (What sales tax practitioner doesn’t have $100,000 and 200 transactions permanently tattooed on their memories?) – the Wayfair decision and subsequent legislation throughout the country have begged so many more questions:
- What is a “sale”?
- What if I don’t make any taxable sales?
- What is the measurement period for the economic nexus threshold?
- Do I qualify as a marketplace facilitator?
- What is a marketplace facilitator?
- Does physical presence even matter anymore?
- How are drop shipments treated?
The list goes on and on. Some states answer these questions more clearly than others. Often times the answers beg more questions. Meanwhile, taxpayers just want to make sure they are doing the right thing when it comes to sales tax.
We haven’t even gotten to the topic of whether or not the transaction is taxable in a particular state, how it should be sourced, or what exemption certification is acceptable. Let’s save that for a future blog post or one of the famed GBQ SALT webinars I have heard so much about. Spoiler alert: one is coming shortly, and I promise to tell at least three jokes that are guaranteed to get an awkward chuckle.
We put two candles on the birthday cake and, just like that, economic nexus is officially a toddler. It seems like yesterday when people were wondering how quickly states would act, or if they would act at all. The aftermath has been as predictable as the mood of, well, a two-year-old. The one thing that remains constant throughout this whole ordeal is when a taxpayer asks his or her service provider whether or not they have nexus in a particular state, we can still give the age-old response… “It depends.”
