Episode Transcript
[00:00:09] Speaker A: Welcome to Taxing Poetic. I'm your host Tim, with Jenny and our producer JB.
[00:00:16] Speaker B: Hey.
[00:00:16] Speaker A: And in this episode, we're going to be talking about Wayfair, which is not just a furniture store on the Internet. And Jenny, I see you have champagne.
[00:00:25] Speaker B: I do have champagne. I wish I could say it was for my birthday or something exciting, but I know you and I know, because we're sales tax nerds, that this year is the five year anniversary of Wayfair.
[00:00:37] Speaker A: Oh. So exciting. We should all raise a glass.
[00:00:39] Speaker B: We should raise a glass. Raise a glass to Wayfair.
[00:00:41] Speaker A: Amen.
[00:00:42] Speaker B: Because for sales tax professionals like us, it is the gift that keeps on giving the whole year through.
[00:00:48] Speaker A: Clark absolutely. Jenny, why don't you talk a second about what is Wayfair? Like, why are we actually talking about this Internet company? And kind of give us just a quick synopsis behind Wayfair itself?
[00:01:00] Speaker B: Absolutely. Again, for sales tax nerds like us, we just call it Wayfair hey, wayfair. Wayfair. But maybe for someone like JB. Sales tax 101. Wayfair is actually short for a Supreme Court case called Wayfair versus South Dakota.
[00:01:17] Speaker A: Awesome.
[00:01:18] Speaker B: Yes. And the actual anniversary of the date of when Wayfair was passed was June 21, 2018. And it was a landmark decision, which really turned our industry upside down.
[00:01:32] Speaker A: Turning the industry upside down, basically. Because of what like, prior to Wayfair, what were the reasons or what did you actually have to do to meet the requirement to actually register an estate?
[00:01:44] Speaker B: Well, first of all, I had to buy my furniture somewhere else before Wayfair, but now that there is Wayfair. But you mean from sales tax perspective?
[00:01:53] Speaker A: Yes.
[00:01:54] Speaker B: Before Wayfair, you could sell anything online.
[00:01:59] Speaker A: I actually furnished my first house that I ever purchased from Amazon Purchases, and.
[00:02:03] Speaker B: Not paying a penny's worth of that was I know.
[00:02:06] Speaker A: It was actually a huge play for the longest time. Right. Because Amazon, you could buy things, e commerce, retailers, they wouldn't charge you sales tax, and people knew the ins and outs. Actually, there's a number of different sales tax cases that all kind of not really are I will say are impacted by Wayfair, but are kind of intertwined and have similar type issues. Right, absolutely.
Thinking about the foundational cases behind sales tax. Right. So going all the way back in history, 1967. Right. And we look at National Bell Hess versus Illinois, and understanding that was like, the first case that actually set the standard for physical presence. Right. And saying that a salesperson or a mail order company actually had to establish what physical presence physical presence right.
[00:02:51] Speaker B: Within to be able to tax a company that's exactly right.
[00:02:54] Speaker A: Or have the requirement to actually tax someone. Right. And then about ten years later, the Supreme Court heard a case which was Complete Auto Transit. Right. Complete auto transit versus Brady, which was actually a Mississippi case, a Mississippi tax commission. And it established the four prongs for sales tax, or what we consider the four prong tests. And Jenny, what are those four prongs?
[00:03:13] Speaker B: Oh, gosh, now you're going to put me on the spot.
Oh, boy.
[00:03:17] Speaker C: Quiz early.
[00:03:18] Speaker B: I know.
[00:03:18] Speaker A: There we go.
[00:03:19] Speaker B: Quiz time yet? No, I still need to use the Google machine. Well, how about I'll name two and you name two?
[00:03:24] Speaker A: That sounds awesome.
[00:03:25] Speaker B: Okay, how about you need to have substantial Nexus.
[00:03:28] Speaker A: Beautiful.
[00:03:29] Speaker B: Yes.
You also can't discriminate against interstate commerce.
[00:03:33] Speaker A: There you go. So nondiscriminatory tax. And then it needs to be fairly apportioned.
[00:03:37] Speaker B: Correct?
[00:03:38] Speaker A: Right. And then the last one is it has to be a fair relation to services.
[00:03:41] Speaker B: Yes.
[00:03:41] Speaker A: So a company has to be able to have, like, police services, fire services, and things of that nature. So that was all kind of a big thing with complete auto transit back in 1977 and establishing a little bit further definition of what physical presence would actually entail in that four pronged test. And then we fast forward all the way to 1992 in Quill. Quill versus the State of North Dakota, which all Quill really did was truly re cement the Bella Hest decision and actually look at the requirements for collection of tax. But more from a use taxed lens, from the use tax side. Right. Because North Dakota was actually trying to enforce with the Quill company that they had to collect kind of like a retailer's use tax from their customers using products within the state. And Quill was like, no, absolutely not. We don't have physical presence. We don't have a requirement. And the Supreme Court kind of agreed with them.
[00:04:30] Speaker B: Right? Well, based on the previous decisions, supreme Court decisions, like you say, stair deciding. I'm kidding.
[00:04:40] Speaker A: Jenny did not get an A in Latin, and we will not quiz her on Latin phrases, but star. Right?
[00:04:46] Speaker B: Yes.
[00:04:47] Speaker A: So, yes, but then we get into the Wayfair decision and actually what occurred with the current Supreme Court ruling five years ago. Excuse me? And they really had to take a step back and kind of analyze the economic marketplace. Right.
[00:05:04] Speaker B: Sorry. The world had changed when you think about it, since these cases, previous cases you mentioned were decided, and it changed quickly. As we all know, the Internet was invented.
[00:05:16] Speaker A: Thank you, Al Gore.
[00:05:17] Speaker B: Yes, the internet was invented.
[00:05:18] Speaker A: Right.
[00:05:19] Speaker B: And companies like Amazon exploded quickly because ordering stuff online is freaking cool.
[00:05:28] Speaker A: How many times does the Amazon truck stop at your house on a daily?
[00:05:31] Speaker B: A lot. Like JB said the other day, JB says if I don't order something once a day, they think I'm dead and come check on me. And I totally feel that and I feel seen. Oh, God, I love yes, so but you're right. I remember for years prior to Wayfair, us sales tax professionals talking about that just how crazy it is that Amazon is a billion dollar business and doesn't collect sales tax.
And you go back to these other cases you were just talking about, like Bella's Hess, however you say it, and you think about how these states, like North Dakota and South Dakota and various others are going back.
[00:06:14] Speaker A: They want their fair cut.
[00:06:15] Speaker B: Yeah. And they feel like even though we don't have a physical store representative in this know, you're still driving your trucks into our state to deliver, your know, you're still using our fire and police protection if something happens. So, yeah. Is it the whole due process?
Is it fair? And so, like you say, the Supreme Court really just sided with the yeah.
You don't have physical not we can't rule in favor of online sales.
[00:06:49] Speaker A: There you go. It's just weird.
And that's what they kind of had previously taken or should I say they hadn't really taken up listening to a case right. Or wanting to grant rid of a particular case to actually opine on this because they were waiting for Congress. Right. So if you actually read Justice Kennedy's opinion, the majority opinion on the ruling in wayfair, it was really kind of interesting, because he flat out blasted Congress in the opinion and how exciting it is to go read a Supreme Court opinion. But you all should actually take a few minutes and actually read it, if you're interested. And you can hear the tonality that he said. Because of Congress's inability to create bipartisan legislation to actually address this issue, the Supreme Court actually came out for one of the very few times in their history they admitted that they were wrong, and they said, we should never have opined on Quill. We're actually going to remand our position back to the complete auto transit case, and we're going to focus on substantive economic presence right. The substantial economic nexus component, which then they said, it's not our position to define what substantial economic presence is and what that threshold may be. We're going to leave it up to the states. And that's where you had South Dakota come up with the first thresholds right. $100,000 in economic nexus, 200 transactions, which was really important, and it effectively did change our compliance jobs forever. Right. Because now you have companies, instead of being required where they have a physical presence, like in Georgia or Florida right. If they're meeting these economic nexus thresholds everywhere throughout the world or throughout the United States excuse me. They have to now collect tax.
[00:08:34] Speaker B: Exactly.
[00:08:34] Speaker A: And they have to remit it.
[00:08:35] Speaker B: Yes.
[00:08:36] Speaker A: Okay.
[00:08:36] Speaker B: Yes.
[00:08:37] Speaker A: And creates lots of registrations.
[00:08:39] Speaker B: Yes. Our industry exploded. It meant every company.
The thresholds at the beginning, I think, were around the $100,000 mark. If you had gross sales of any kind into a state in that amount, you might have nexus, and you need to start collecting sales tax.
[00:08:55] Speaker A: And people thought that this was, like, kind of the end all be all right. It was like, okay, we're just going to stop now, and we've got this economic presence thing and there's going to be no more sales tax cases. Ever heard? No, that's not the case. I mean, we still now have changes. There's people who are increasing their thresholds. There are states that are getting rid of the transaction based threshold, which was crazy to begin with. Right. If you think about a transaction threshold and 200 transactions, you have somebody on Etsy.
Jenny hears me talk about this all the time in front of prospects. Poor Grandma.
[00:09:27] Speaker B: Poor Grandma.
[00:09:28] Speaker A: I know. Poor grandma who's like making little potholders and stuff and selling them on Etsy for five dollars to seven dollars.
[00:09:33] Speaker B: Right.
[00:09:34] Speaker A: She sells 200 of them in the state of Colorado. She now has to register for sales tax. Right. If Etsy wasn't a marketplace facilitator and we won't even talk about marketplace facilitators because that's a completely separate discussion with remote sellers. I mean, they're kind of joined together. But we're really focusing on the economic Nexus piece and the Wayfair piece today, we'll talk about yeah, we'll do marketplace.
[00:09:54] Speaker B: Marketplace at some point.
[00:09:55] Speaker A: Absolutely. That's another component. Right. But if you do sell greater than 200 transactions, you are legally required to collect sales and use tax.
[00:10:06] Speaker B: Exactly.
[00:10:06] Speaker A: And you may only have $1,000 in taxable sales. So some of these states are reviewing these thresholds and making adjustments kind of as we're moving forward. And obviously we still have to talk about the taxability of items, too, right?
[00:10:18] Speaker B: Sure.
[00:10:18] Speaker A: Just because you have an economic nexus somewhere doesn't mean that your products are taxable or if you're doing wholesale sales. Right. Like Illinois.
[00:10:25] Speaker B: Yes.
[00:10:26] Speaker A: Right. If you do a million dollars in wholesale sales inside of Illinois, do you have to register for sales tax? Possibly not. Right. The states come back to us, and certain states have said, if 100% of your transactions are exempt, we don't want you registering here.
[00:10:41] Speaker B: Right.
[00:10:42] Speaker A: We don't want to deal with the paperwork just as much as you don't. So it's still really important to absolutely meet with people like us and our other accounting advisors in the sales and use tax space to actually give you some guidance on this.
[00:10:55] Speaker B: Absolutely. They are the exception to the rule, I would say. Even if you make millions of dollars in sales and none of them are taxable, you still need to report them because then there's also a retailer selling your wholesale products that also report tax that they need to match up against. As far as audits go. Just making sure you have dotted all the I's and crossed the T's with whether you have Nexus or not with reporting absolutely, 100%. Yes. And so Wayfair not only just super impactful and important to us as sales tax professionals, but I think it's just a testament to the government, our branches of government, working quickly for once, to try to keep up with what's happening in the world, in the global economy and marketplace.
[00:11:43] Speaker A: Well, and this is where you get to find that Jenny and I will sometimes disagree, and you can look at Wayfair and actually say that it was because of our branches of government not working quickly.
[00:11:50] Speaker B: Oh, that's true.
[00:11:51] Speaker A: It actually came about.
[00:11:53] Speaker B: But because it is the one, like you say, it's one of the few cases where they say they were wrong.
[00:11:58] Speaker A: That's right.
[00:11:58] Speaker B: They were wrong. And so they said that because I don't know if anyone ever anticipated everything.
[00:12:03] Speaker A: They didn't anticipate the growth of and the way that it was going to expand.
[00:12:07] Speaker B: And the states really losing out on a lot of revenue. I completely much needed and fairly needed because of online sales.
[00:12:17] Speaker A: Well, yeah, we're going to pop into our pop quiz hotshot section here.
[00:12:22] Speaker B: I know.
[00:12:23] Speaker A: So kind of introduced this a little while ago and the fact that we're going to be actually teeing up a quiz of each other and keeping score throughout the podcast year and comparing brain pans, if you will, and whoever's got the highest score at the end of our measured segment, whether it be ten episodes or twelve episodes or however long we continue to do this, the other person has to read a positive statement that is constructed by the other individual. So that's going to be an awesome.
[00:12:54] Speaker B: I'm writing mine right now.
[00:12:55] Speaker A: I know. Well, you can write it and you can light it on fire because I'm going to win.
[00:13:00] Speaker B: We're both just a tag competitive just a little bit.
[00:13:05] Speaker A: All right.
[00:13:05] Speaker B: Wait, hold on. I feel like I need a handicap like in golf for this. It's like you're Chad GBT and I'm just maybe Yahoo search engine.
[00:13:14] Speaker A: You're setting me up like big time. Literally.
[00:13:17] Speaker C: He's over three. This is going to look tough.
[00:13:19] Speaker B: I know. And I feel like mine are not that hard. Anyway, all we'll just see how this.
[00:13:23] Speaker A: I'm not going to lie, I'm giving you two easy ones, but I also got a difficult one in here. All right, you're going first. Here's the first one I'm going to roll off. You want to alternate? You want to go one for one?
[00:13:32] Speaker B: Okay.
[00:13:33] Speaker A: I love it.
[00:13:33] Speaker B: Yeah. JB. Okay.
[00:13:34] Speaker A: JB.
[00:13:35] Speaker B: Okay. One to one. Okay.
[00:13:36] Speaker A: All right. So what is the average transaction count threshold for remote sellers in a state? To trigger nexus, I'd say the average.
[00:13:50] Speaker B: Has to be 200.
[00:13:52] Speaker A: Give her one JV yes.
[00:13:54] Speaker B: Did I get it?
[00:13:54] Speaker A: You got it. Right.
[00:13:55] Speaker B: It used to be 100. Or some states it's 100, isn't it?
[00:13:59] Speaker A: Some states it is 100, but most states went to $100,000 in sales and 200 transactions.
[00:14:05] Speaker B: That's right. Okay. All right.
[00:14:07] Speaker A: But a lot of states have started getting rid of the transaction threshold. Thank you. Colorado and other states. Yes.
[00:14:13] Speaker B: Good stuff. All right. Yay me. Okay.
[00:14:15] Speaker A: Jeb.
[00:14:16] Speaker B: All right, so here's one of mine for you, Tim.
This is really easy. I'm just teeing you up. How many states have enacted wayfair laws?
[00:14:27] Speaker A: 45.
[00:14:29] Speaker B: Damn it.
Okay, part two.
[00:14:37] Speaker A: One question, one question for you. In 27 equal subdivided parts, it's one to one. All right. One to one.
[00:14:44] Speaker B: Okay.
[00:14:45] Speaker A: All right, it's me. Okay.
What is the type of nexus called that looks at dollar thresholds?
[00:14:52] Speaker B: Oh, economic nexus. Yay. Good.
Yes. All right. Gold star for me.
[00:14:59] Speaker A: Gold star for you.
[00:15:00] Speaker B: Okay, so this is kind of a subset of my last question.
You just said 45 states have enacted warfare laws. Which state was the last one to do so?
[00:15:10] Speaker A: That would have been Missouri.
[00:15:11] Speaker B: Oh, my gosh. Way to go, Tim. Cheers to you.
[00:15:14] Speaker A: Yeah. Chat GPT over here. Campaign open. AI.
[00:15:17] Speaker B: Yes.
[00:15:18] Speaker C: Now you really have to get the third one right.
[00:15:22] Speaker A: Okay. So here comes Jenny's brain buster. This is going to be awesome.
[00:15:25] Speaker B: Get any more brain busters for me?
[00:15:27] Speaker A: Here it comes. Okay, who was the justice that filed the dissenting opinion in the Wayfair case?
[00:15:35] Speaker B: I have read this. Oh, goodness, don't tell me. Scalia.
No. Thomas?
[00:15:44] Speaker A: No.
[00:15:45] Speaker C: She gets seven guesses.
[00:15:47] Speaker B: I know, right?
[00:15:47] Speaker A: No, she anyways. Jenny, it's John Roberts.
[00:15:54] Speaker B: I knew that.
[00:15:56] Speaker A: All right, what's your last question? Fire it at me.
[00:15:58] Speaker B: I don't know if it's so much wayfair related. I just always think this is a little bit of fun. Trivia, what year was sales tax first implemented?
[00:16:09] Speaker C: We're doing a plus minus. Does he have to hit it exact?
[00:16:14] Speaker B: I don't know.
[00:16:15] Speaker A: I want to say it was like 1937 or something like that.
[00:16:18] Speaker B: I actually thought it was in the 30s as well, but it was 1921. Do you know which state and why? I'm sure you know why state had the first sales tax.
[00:16:28] Speaker A: I want to say it was like West Virginia.
[00:16:30] Speaker B: Yes.
[00:16:31] Speaker A: Yeah, it was West Virginia. And it had to do something with liquor. Right.
[00:16:35] Speaker B: I think what I've learned is that it was a way to raise revenue during the depression beginning of well, actually.
[00:16:43] Speaker A: It wouldn't have been liquor because I was right in the smack in the middle of prohibition because yeah, they had just actually started prohibition. Dumb response, Tim. 20 to 33, but yes. No, yeah, I knew it was West Virginia because actually I had to research a beer tax in West Virginia for one of our clients.
[00:17:00] Speaker B: One of our clients.
[00:17:01] Speaker A: And West Virginia put all over one of their websites that they were the first state to ever enact a tax.
[00:17:08] Speaker B: I was know, I know. I thought it was Mississippi, but Mississippi was one of the first ones. But it was all mostly related, like consumption, taxes, know, raising money.
[00:17:19] Speaker A: There you go.
[00:17:19] Speaker C: For the states, if you're keeping track at home, that's two points for Jenny and two points for Tim. He got a bonus question, I feel like didn't count.
If you guys end up tying at the end of the year, he's going to want he's going to remember that.
[00:17:31] Speaker B: I know that's fair.
[00:17:32] Speaker C: There's an asterisk.
[00:17:33] Speaker B: That was a good one, though, with Robert.
[00:17:35] Speaker C: That was our first one so it's two to two for the year.
[00:17:37] Speaker B: I need to do more studying.
[00:17:38] Speaker A: So we're going to talk for a quick second, though, about some oddities related to Wayfair right. And some of the interesting things that have kind of been byproducts of the whole Wayfair situation. And one of those is one of our favorites, colorado.
[00:17:55] Speaker B: Yes.
[00:17:56] Speaker A: Right. And their wonderful retail delivery fee.
[00:17:58] Speaker B: Yes.
[00:17:59] Speaker A: Right. Jenny, what's up with the retail delivery fee? What is it?
[00:18:03] Speaker B: I feel like Colorado decided it wasn't know, just tax, sales, whatever use tax, they want further compensation, I believe, for keeping up their roadways and transportation.
[00:18:20] Speaker A: At least that's the way they framed it.
[00:18:21] Speaker B: That's the way they framed it.
[00:18:22] Speaker A: Okay.
[00:18:23] Speaker B: It's kind of almost a transportation tax in my mind, is how I think about it.
[00:18:26] Speaker A: $0.27.
[00:18:27] Speaker B: Yes.
[00:18:27] Speaker A: Right.
[00:18:27] Speaker B: Twenty seven cents per item. Right.
[00:18:30] Speaker A: Actually per taxable transaction.
[00:18:31] Speaker B: Taxable transaction, yes. Per taxable into the state.
[00:18:34] Speaker A: That's right.
[00:18:35] Speaker B: And so you have to count and it doesn't matter.
[00:18:38] Speaker A: Like it's any kind of motorized vehicle. Right. So unless you're delivering by a bicycle or a horse and hay cart, dog, carrier pigeon, you can avoid the tax if you're using any of those. But if you're using any kind of motorized vehicle, then your host golf cart I think golf cart will qualify.
[00:18:56] Speaker B: I think so, too. Uses the roads.
[00:18:58] Speaker A: Yeah, exactly. Right. But it was really kind of interesting how they passed it. Right. If you actually think about it. And the reason we're bringing this up, colorado has some very interesting segments inside of their law about legislative procedure and policy.
[00:19:14] Speaker B: Right.
[00:19:15] Speaker A: And I'm not going to get into the nuances of it, but effectively, if a certain type of legislation is going to create X amount of revenue within the state, it typically has to go to voters if it meets or exceeds a certain threshold. Okay. Well, what they ended up doing is with this retail delivery fee, to get it passed through the legislation without having to go to a public vote, they split it up into five independent sections, which is really kind of sneaky.
[00:19:42] Speaker B: It is sneaky, yes.
[00:19:43] Speaker A: And so some people are not very happy about that because they bypass the citizen or the public vote to actually enact this retail delivery fee. So we're pretty sure that it's going to get challenged at some point.
[00:19:53] Speaker B: That's some house of card stuff right there.
[00:19:55] Speaker A: It seriously is. And it's ruffled a lot of feathers. And we're expecting to see some lawsuits over this one. But yeah, the Colorado retail delivery fee, if you don't know about it, you need to ask one of your tax providers about it's. Kind of important.
[00:20:06] Speaker B: Yes.
[00:20:06] Speaker A: Actually has its own return, too.
[00:20:08] Speaker B: Yes. And they'll just add it to your profile.
[00:20:11] Speaker A: They don't even ask you.
[00:20:12] Speaker B: You'll just log in or get a notice, and they're like, hey, you owe us. Transaction per transaction.
[00:20:19] Speaker A: There you go.
[00:20:19] Speaker B: Yeah. We've had some clients scrambling about that.
[00:20:23] Speaker A: The key thing to understand, though, too, is that it is per transaction. So if you have 500 items in a transaction, you only get charged the $0.27 once, right?
[00:20:31] Speaker B: Right. Exactly.
[00:20:33] Speaker A: So then we got to talk about Illinois. Right.
Illinois. And they passed this wonderful level the playing field act, or level the playing field legislation, which was supposed to kind.
[00:20:45] Speaker B: Of put everyone you just made air quotes.
[00:20:47] Speaker A: Oh, yeah, I did. Yeah. My favorite air quotes, how everyone can see how good I smell.
No, but yes, stealing one of JB's jokes.
But in Illinois, this level of playing field legislation was supposed to bring everyone into truly an equal standing with regards to Illinois'sourcing rules. Right. And Illinois, for the non tax geeks that are out there, has very, very interesting sourcing laws with regards to origin based sourcing.
[00:21:20] Speaker B: Explain sourcing.
[00:21:21] Speaker A: So sourcing is how you actually identify thank you for asking. It's how you identify the tax rate for a particular transaction.
[00:21:27] Speaker B: Okay.
[00:21:28] Speaker A: Right. Illinois typically uses kind of modified origin based sourcing, where you would typically use where the origin of the item is actually being shipped. Okay.
Or if you're looking at where an order is being administered. So if you have an office in Cook County, and you take the order in Cook County, which is city of Chicago or outlying areas, and you ship it from, like, Rosemont, Illinois, and you move it to Springfield, Illinois, you're actually going to use the Cook County sales tax rate because that's where the order was actually administered from. Right. Well, what this level the playing field law says is anyone who has a physical presence inside of the state of Illinois and ships goods from outside of the state of Illinois into Illinois gets to use destination based sourcing, and they only have to collect at the state rate. So think about that. So Jenny has her office and all of her team inside of the city of Chicago, and she has a warehouse that's in St. Louis, Missouri, and she ships all of her goods into Illinois from St. Louis, Missouri. She only has to collect at 6.25%. But if I do not have an office or any physical presence in Illinois, and my warehouse is outside of Illinois and I ship into Illinois, I have to use destination based sourcing, and I have to collect all the local taxes. So if I ship into the city of Chicago, I got to collect upwards of 13%.
[00:22:56] Speaker B: Is that a possible prong violation?
[00:22:58] Speaker A: Oh, what prong would that be, Jenny? Maybe number three, the discriminatory tax. Discriminatory 100%.
[00:23:05] Speaker B: Yes.
[00:23:06] Speaker A: Right. So not picking on the state of Illinois, but hey, guess what, guys, you kind of maybe have a tax issue, and a lot of people have written some articles about this. It's going to be quite interesting. There's some people challenging this through tax tribunals and other avenues. But it is a very interesting case of a discriminatory tax and we haven't really seen a discriminatory tax, at least this blatant of a discriminatory tax in the sales tax world in many, many years. So going to be really interesting to see how this shakes out over the next.
[00:23:35] Speaker B: I know it is surprising that after all the already tried and decided cases against discriminatory tax, it's one of the easiest ones to prove.
[00:23:44] Speaker A: Exactly.
[00:23:45] Speaker B: And it's just interesting that they would do that well.
[00:23:48] Speaker A: And it just goes to show, like, when you were talking about earlier, how fast governments were trying to react to the wayfair decision and they did react very quickly. Like after the Supreme Court issued their opinion, I mean, within weeks, you had Minnesota. That was like one of the first states that came out and said, oh, hey, guess what? You exceed this threshold, you got to register in our state. Boom. Ready to rock and roll. And some other states took their time and kind of evaluated and tried to figure some things out. Texas was a great know, our friends in Texas always love to know thoughtful approaches to taxation, and I believe in the way that they actually administer their tax. And they waited to see what threshold that they were going to establish. Whereas other states have just been ratcheting up those thresholds because of their quick reaction. Right. Natural reaction of, oh, my gosh, we got to do something right now.
[00:24:33] Speaker B: Right.
[00:24:33] Speaker A: I think that's what happened in Illinois. I think you had some people that reacted and are like, man, there's a bunch of people that are getting hosed on know, remote seller thing, and we got to fix this, and we got to create an equal playing field for everybody.
Well, they just wrote a law that completely violated every component of complete auto transit.
[00:24:50] Speaker B: Well, I'm thinking JB just make sure you're keeping track of everyone we've offended.
[00:24:55] Speaker A: Oh, yes.
[00:24:56] Speaker B: Illinois. Colorado.
[00:24:57] Speaker A: Okay.
If you're keeping a list of everybody that I'm going to offend, you're going to have a very long list by.
[00:25:04] Speaker B: The end of this. Al Gore.
[00:25:05] Speaker C: Al Gore is on there?
[00:25:06] Speaker B: Yeah. Okay, good. I'm sure you're okay.
[00:25:08] Speaker A: Absolutely.
[00:25:09] Speaker C: Jenny, you do the third one. I've heard Tim talk for, like, 40 minutes.
[00:25:16] Speaker B: Oh, the transaction count.
[00:25:17] Speaker C: Yes.
[00:25:19] Speaker B: Just per Tim's example earlier, my poor grandma doing her needlepoint and selling. I mean, and I buy these things off of Etsy. I have bought many of a Sassy needlepoint cross stitch saying that I have framed for friends. Like, that's what she said. Or maybe some of cats. I don't know. But I buy these things.
[00:25:41] Speaker A: Keyboard cat.
[00:25:42] Speaker B: Yes, keyboard cat tapping away at the keys. So there's some fun stuff there golden Girls. I bought a stay. Golden one.
Yeah. So there's just real people I'm just saying there's real people out there like me buying from grandmas in Etsy of their needlepoint, of their patterns and all that stuff. So if my favorite seller on Etsy sells 200 of those to me, which I'm not quite there yet. Not quite at 200.
[00:26:08] Speaker A: Okay.
[00:26:08] Speaker B: Yeah. Supposedly, like you say, according to the law, she has to register with maybe if she sold them to me in the state of Georgia and she's in Florida shipping those to me, she had to register with the state of Georgia and charge sales tax if she was.
[00:26:22] Speaker A: Like, directly selling them to you. Right. Because through etsy. Etsy may have the requirement to go ahead that's true. Collect on her behalf.
[00:26:29] Speaker B: But it's just in a broad sense right. Yes.
[00:26:33] Speaker A: Keeping things quite simple.
[00:26:34] Speaker B: Correct. Yes. That Etsy would have to collect on her behalf, but it would have to be remedied, and she'd have to add that to her price state that I'm filing.
[00:26:43] Speaker A: Enlist.
She'd have to add it to her price.
[00:26:46] Speaker B: So, again, trying to keep up with the times and online marketplace sellers and small versus big, I feel like that's something else, like you have said previously, that's been reviewed.
[00:26:59] Speaker A: Do you think that there's a business case that can be made for people? Does it create some form of competitive advantage if you don't register an estate?
[00:27:07] Speaker B: Oh, absolutely.
[00:27:08] Speaker A: Why is that?
[00:27:09] Speaker B: Because the cost of your item is less.
[00:27:11] Speaker A: Right.
[00:27:12] Speaker B: It's just like it's the answer.
[00:27:13] Speaker A: So we typically talk to clients sometimes, and they'll say, well, my competitor is not charging tax, and why do I have to go and charge it? Because you're telling me that I have.
[00:27:21] Speaker B: To charge, because that's what my teenagers say to me. Like, oh, my friend's not doing that. Why do I have to do that?
[00:27:26] Speaker A: Exactly.
[00:27:27] Speaker C: Right.
[00:27:27] Speaker A: And that law doesn't work in business.
[00:27:28] Speaker B: No, it doesn't work either.
[00:27:32] Speaker A: And the slowest person running is the one that usually gets eaten by the bear.
[00:27:35] Speaker B: Correct.
[00:27:36] Speaker A: So you don't want to be the one, know, getting eaten by the state.
[00:27:39] Speaker B: Of to tell your competitor good luck with their future audit.
[00:27:44] Speaker A: Exactly. And do the right thing.
[00:27:45] Speaker B: And do the right thing. Exactly. And that was the issue with Amazon for so many years. Not only are they boxing out the big box stores just through the convenience, but they also weren't having to charge sales tax.
[00:27:58] Speaker A: Exactly. And that's why the very first believe it or not, one of the very first pieces of legislation that was put up in Congress was actually called the Marketplace Fairness Act.
[00:28:08] Speaker B: Yes. Marketplace fairness.
[00:28:09] Speaker A: Marketplace fairness. And it was all about keeping things fair, because Wally World and Target and all those wonderful places have to charge and collect sales tax where Amazon didn't.
[00:28:19] Speaker B: Exactly. Yes. So just not fair. I also hear that from my teenagers. So at that you know what my.
[00:28:25] Speaker A: Dad used to tell me?
[00:28:26] Speaker B: What?
[00:28:26] Speaker A: You know what fair is?
[00:28:27] Speaker B: What?
[00:28:28] Speaker A: Where you go to kiss a pig and get a blue ribbon.
[00:28:32] Speaker B: I don't know if I've ever kissed a pig at a fair.
Hey, I don't know if you've been watching this on. Video, but you might have noticed my hair looks better now and the champagne bottle is yeah, yeah. And we're not going to talk about what happened to the champagne bottle.
[00:28:47] Speaker A: Nope.
[00:28:47] Speaker B: Nope. So we're just moving on.
[00:28:48] Speaker A: We're moving on. Moving on to grilling the producer.
[00:28:52] Speaker C: Okay.
[00:28:52] Speaker A: So this is when we get to see if JV's actually been breathing through his eyelids or has actually been paying attention.
[00:28:58] Speaker C: There was a good section there in the middle when I looked up, and I was like, how long have I been sitting here?
Depending on when you at, like, what part you're going to ask me about? We'll find out.
[00:29:11] Speaker A: Biggest thing that I'm curious if you picked up on is regarding economic nexus and what truly is economic nexus. Like, what's the requirement for you to collect sales tax in most states?
[00:29:22] Speaker B: I would ask, well, JB, I will grill you and just ask you now, what do you think if I said, hey, wayfair, like, what does wayfair mean? If you had to tell your wife, if you went home to your wife tonight and she said, hey, what'd you talk about today at your podcast? And you said wayfair, and she said, what's wayfair? What would you say?
[00:29:43] Speaker C: It's a court case in one of the Dakotas. Yes, but I don't know if it's the important Dakota. The south is the important. All right, so I'm going to write down so I'm going to add North Dakota.
[00:29:56] Speaker B: Yeah.
[00:29:56] Speaker C: We offended people to yes, north Dakota.
[00:30:00] Speaker B: We did.
[00:30:02] Speaker C: What district court is so who won?
[00:30:05] Speaker A: South Dakota won.
[00:30:06] Speaker C: So when it's wayfair versus South Dakota. South Dakota winning. That's good.
[00:30:11] Speaker A: Well, I mean, define good.
[00:30:14] Speaker B: It was bad for wayfair.
[00:30:15] Speaker A: It was bad for Wayfair and bad for ecommerce companies, but it was great for us as tax advisors and compliance solution individuals and for the states. Cool. Yeah. And for the states, it was great for the revenues. Yeah. 100%.
[00:30:28] Speaker C: Dakota's got a lot of play today.
I don't know if I've ever been involved in a conversation that brought up both Dakotas.
[00:30:35] Speaker B: It is. I know that's right. Because Quill isn't quill, North Dakota.
[00:30:39] Speaker A: Quill is North Dakota. Yeah, that's right.
[00:30:40] Speaker B: So all the sales tax stuff, dakota's coming in strong.
[00:30:44] Speaker C: Any other recap stuff?
[00:30:45] Speaker A: Economic nexus. What do you know about economic nexus?
[00:30:48] Speaker C: Yeah, so I actually wrote down that you didn't bring that up.
[00:30:51] Speaker A: Okay, I must have just missed it.
[00:30:54] Speaker B: Wow.
[00:30:55] Speaker A: So you can go to chat GPT and check that out later on, and we can recap your Chat GPT answer in one of our future episodes.
[00:31:02] Speaker C: What is the big information you wanted me to make sure I got about economic nexus?
[00:31:07] Speaker A: $100,000 is the baseline threshold in most states. Okay. We say most states because the larger states, like California, New York, Texas, have much larger thresholds. There's a couple of other states that have higher thresholds than 100, but 100 is about the minimum we would love.
[00:31:22] Speaker B: To leave that little nugget with our listeners, which is if your company has gross sales of $100,000 in a particular state, you need to talk to a tax professional.
[00:31:34] Speaker A: That's exactly it. I mean, you legitimately need to get in front of a sales tax professional to actually help you do a nexus study. If you have not done a nexus study yet, being as it's the what the five year anniversary of five year anniversary, if you haven't conducted a thorough nexus study of your sales and what your business is doing, you need to contact someone.
[00:31:56] Speaker B: And it's not retro. What's the word? Retroactive, like, before 2018.
[00:32:00] Speaker A: Right.
[00:32:01] Speaker B: So if the states you are selling in have enacted those laws, you need to talk to somebody.
[00:32:08] Speaker A: That's exactly right. And the big thing is that if you haven't been registered in these states, this is the last thing I'll probably leave you with, is that there is something that's called unlimited look back. Now, we don't typically see a lot of states enforce unlimited look back, but if they know that you willfully have been avoiding registering for sales tax in those states, they could argue fraud. They could say that you've been fraudulent in your approach to your business activities within those states, and they can enforce the tax in greater than their statute of limitations. Most states statute of limitations for legal perspective is three years. But some of these states can come upwards four or five years for assessments back to the original enacting date of their wayfair laws. Let's be honest, a lot of states didn't really get into gear until they did not until 2020.
[00:32:55] Speaker B: Right.
[00:32:56] Speaker A: Usually end of 2019, beginning of 2020 is when a lot of states started passing legislation.
[00:33:01] Speaker B: So, yeah, you need to look at the last few years of your sales and just make sure you are in compliance with these states, because they will find you.
[00:33:09] Speaker A: All right. And so thanks for listening. Thanks for taking the time. Jenny, it was great having you here today, as always.
[00:33:16] Speaker C: We have a decent list of people we need to apologize to.
[00:33:19] Speaker B: Oh, my gosh.
[00:33:20] Speaker A: Okay.
[00:33:20] Speaker B: I also have my haiku, and Jenny.
[00:33:22] Speaker C: Is going to read her haiku that.
[00:33:23] Speaker A: She wrote because she's a poet and didn't know it.
[00:33:25] Speaker B: I am a poet.
[00:33:26] Speaker C: People that we have offended. Al Gore. The Dakotas. North Dakota.
[00:33:32] Speaker A: Really?
[00:33:32] Speaker C: Kind of specifically people who know how to pronounce Bella Hess, the Colorado roads. And Tim needs to apologize to me for stealing my joke.
[00:33:41] Speaker A: I'm sorry, JB, for stealing your joke, but it was too good not to.
[00:33:43] Speaker B: It was a good one.
[00:33:44] Speaker A: I'll leave you $5.
[00:33:45] Speaker B: Thank you.
[00:33:46] Speaker C: Oh, in Illinois.
[00:33:47] Speaker A: Oh, yeah, in the state of Illinois. Yeah. We kind of attract some a little.
[00:33:50] Speaker C: Bit, a lot of people.
[00:33:51] Speaker A: So, Jenny, you got a haiku for us?
[00:33:53] Speaker B: Yes. Since we're taxing poetic, I decided I'm going to try to write a haiku for every episode. And do you know what the rules are with a haiku.
[00:34:01] Speaker A: Tim, I have absolutely no idea. I did this, like, in, what was it, 8th or 9th grade at some point. But I know a limerick.
[00:34:11] Speaker B: I'm sure you do. Maybe you can write one for the next episode, but JB won't air it. So my haiku, a haiku is three lines. The first line is five syllables, the second line seven syllables. The third line is five syllables. Got it. It's a lot of this counting on your fingers. Like, right here. Okay, so my haiku for today is new couch from Wayfair. Must pay sales tax in Georgia. Thanks a lot, SCOTUS.
[00:34:41] Speaker C: Pretty good.
Tim was nervous.
[00:34:44] Speaker A: He was like, I don't know.
[00:34:45] Speaker B: I know. His face was a little like, any.
[00:34:47] Speaker A: Of you watching, you could absolutely go, Where is she taking this?
[00:34:52] Speaker C: The people that didn't just click away once we said haiku, that's exactly it. And we'll just go to the next step.
[00:34:57] Speaker A: We'll just go to the next all right, thanks, everybody.
[00:35:01] Speaker C: What else you have to tell them.
[00:35:02] Speaker A: To oh, yeah, and please subscribe. Subscribe. And if you actually want to help us write episodes, if you have questions about anything in the sales tax world, you can feel free to email us. We'll be happy to answer and include those questions in our podcast. And we love, as you can see, discussing sales tax topics and even non sales tax topics. So feel free to email us with any questions that you might yeah, this.
[00:35:26] Speaker B: Is fun for us. We love talking to each other, obviously other people in our industry, outside of industry, and just taxing poetic, obviously.
[00:35:35] Speaker A: There you go, taxing.
[00:35:36] Speaker B: It's a lot of fun. And you don't have to listen to these episodes in order. We're going to segment them either by industry or area topic. So just jump in wherever you want.
[00:35:46] Speaker A: And every state that's out there, don't feel that you haven't been slided because.
[00:35:49] Speaker B: We haven't talked about you yet.
[00:35:51] Speaker A: Because it's coming.
[00:35:51] Speaker B: Your time is coming.
[00:35:52] Speaker A: Time is coming to be offended.
[00:35:54] Speaker B: And yeah, please call Tim Howe with your complaint.
That would be great.
[00:35:59] Speaker A: All right, thank you.
[00:36:00] Speaker C: Good job.
