Nuances of State Sales Tax Voluntary Disclosure Programs

This article was originally published in the Journal of State Taxation


Where Does Sales Tax Exposure Come from?

Three years after the U.S. Supreme Court issued its seminal decision in the Wayfair case, 45 states have enacted economic nexus rules and require remote sellers to register and remit sales tax if their activity exceeds a certain threshold (i.e., volume of sales (e.g., $100,000) and/or transactions (e.g., 200)), generally measured within the past or current year. The intent behind the economic nexus threshold rules is to establish a bright-line test for determining whether a company’s activities based on sales and/or volume of transactions is sufficient to establish nexus with a jurisdiction, level the playing field between the instate and out-of-state retailers, ensure a state’s ability to collect tax on taxable transactions, attempt to simplify compliance, and provide a safe harbor for smaller businesses with limited retail sales. However, in reality, Wayfair laws increased the sales tax compliance burden and heightened the anxiety for many multi-state taxpayers.

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