2019 Changes to U.S. Online Sales Tax
Online sales tax rules and collection are always changing, so it’s important for eCommerce stores to keep up.
Here’s a clear guide to online sales tax rules in 2019:
Sales Tax Nexus and Online Merchants
Tax Compliance for Online Marketplaces
New Sales Tax Exemptions
01. Sales Tax Nexus and Online Merchants
The biggest changes to sales tax compliance in 2019 came from the U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. The court case changed the way economic nexus is enforced.
What is economic nexus?
Sales tax economic nexus laws enable a state to require a remote seller to register to collect and remit sales tax if the seller makes a certain amount of sales and/or transactions for delivery into the state within a certain time frame. In many states, the collection obligation is enforced when a remote seller has more than $100,000 in sales or at least 200 transactions for delivery into the state in the current or previous calendar year. Like all sales tax laws, economic nexus thresholds vary by state.
In addition to economic activity, sales tax nexus can also be triggered if merchants have:
Physical presence, like a brick-and-mortar store
Employees or sales reps
Event attendance, like a trade show
Inventory storage
Affiliate partnerships
What changed?
As of 2019, states can also enforce nexus if a merchant ships to their region. That means you may need to pay sales tax even if your business doesn’t have a physical presence in the state.
There are exceptions. In California, for example, economic nexus only applies if out-of-state merchants sell more than $500,000 annually. Impactful sales tax nexus changes have also taken effect in New York and Texas. Update yourself on the new tax compliance laws wherever you ship.
How can Streamlined Sales Tax (SST) help?
In 2000, businesses and government officials simplified tax compliance with Streamlined Sales Tax (SST).
The 24 states that follow SST:
Follow uniform tax rules and definitions
Manage tax collections
Provide online registration
Supplement the cost of Certified Service Providers (CSPs)
Given changes to nexus, some non-SST states have created their own programs to make tax compliance easier for out-of-state merchants. See if you sell in an SST member state.
02. Tax Compliance for Online Marketplaces
If you sell through an online marketplace like Amazon and Etsy, you may not need to collect your own sales tax. Some states have adopted marketplace facilitator laws, which require online marketplaces to collect sales tax on their merchants’ sales. As of January 1, 2020, marketplace facilitator laws will apply to 36 states plus Washington D.C. Elsewhere in the world, marketplace facilitator laws are in effect in the UK, Germany, Italy, and as of January 1, 2020, France.
How will marketplace facilitator laws impact merchants?
Marketplaces are now responsible to collect sales tax on behalf of individual merchants. However, marketplace merchants will still be required to file tax returns in their home states and in some states where they have nexus. If you’re a marketplace merchant, pay attention to further changes to these laws.
03. New Sales Tax Exemptions
Many states provide sales tax holidays, during which sales taxes are reduced or eliminated. Tax holidays incentivize shoppers to support in-state businesses. For example, starting in 2019, Massachusetts will provide a yearly sales tax holiday every August. Check the full list of sales tax holidays for the states where you sell.
Although it isn’t official yet, certain states are looking to provide sales tax exemptions on specific products. Essential items like diapers and feminine hygiene products may become exempt in California, Georgia, Louisiana and Maine. Lawmakers in Texas are also looking to allow sales tax exemptions on beer on July 4th. Stay tuned if these products are relevant to your business.
Keep Track of Online Sales Tax for Your Business
Tax rules are always changing. Add Avalara’s automated tax solution to your Wix site to keep up. Avalara will automatically calculate sales tax with every online store purchase. By automating sales tax collection, you can focus your time on growing your business.
Source: 2019 Sales Tax Changes Mid-Year Update by Avalara | Updated 11.01.2019
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Daniella Dukes
Payments Team Lead
Daniella leads the Payments Marketing Team for Wix.com. Since 2019, she's been crafting sharp content that helps over 700K Wix Merchants get paid, wherever they sell—online, in person and on the go.
In partnership with Avalara.
