A. Sungil Noh, CPA
Certified Public Accountant
Sales Tax Dilemma Could Bankrupt Your Business
In 2018 the US Supreme Court in South Dakota v. Wayfair overturned the established physical presence rules for businesses to determine if they needed to register, collect and pay sales tax in an individual state. If your business has a website and engages in internet based out-of-state sales, you could be exposed to new laws passed by over 35 states requiring you to register, collect, and pay sales tax in that state.
If you think these rules do not apply to you, You Are Wrong! Most states have passed laws stating that if you sell more than $100,000 of products or services OR more than 200 transactions of any dollar amount, you are subject to their rules. Failure to follow their rules could essentially bankrupt your company in a few years with penalties. The AICPA has an example of a company with a $9,000 annual sales tax liability unpaid for seven years. With penalties after 7 years the company would owe the state $2.6 million in back taxes and penalties.
We do not monitor sales volumes or the number of transactions by state and do not register or file sales tax returns for you when we prepare your income tax returns. It is imperative if you have a website selling products or services, or you offer sales across state lines, that you familiarize your self with these rules and protect your company. We can make suggestions for software solutions if you wish, but again, you need to act on this issue because it is not part of your income tax preparation.
We have provided a sales tax informational video that we strongly suggest you watch, and more importantly that you write to your elected members of Congress demanding a fix for this mess. It is a video on YouTube at https://youtu.be/oqlP8VceUxE.