Taxation of online sales not going as smoothly as promised
Brad and Hilary Scott own Prescott-based Halstead Bead Company, a wholesale jewelry supply company with customers across the nation. It is also an NFIB-member business with a cautionary tale to tell about selling online.
For years the U.S. Supreme Court’s Quill Corporation v. North Dakota decision prohibited states from taxing the online sales of businesses that didn’t have a physical presence in the state of a purchaser. But another U.S. Supreme Court decision in 2018, South Dakota v. Wayfair, overturned Quill, allowing online sales to be taxed if a business establishes an economic presence through a minimum number of transactions or amount of total sales.
Off to the races states charged to tap a rich vein of new tax revenue with promises of how software would make it so easy for businesses to comply with. “People failed to appreciate what a complex integration that is,” said Hilary Scott. “Software makes mistakes and small-business owners are responsible for it.”
Brad Scott says Halstead does business in 30 states and although all of them present a challenge, Pennsylvania, Tennessee, and Wyoming are particularly problematic for Halstead. Pennsylvania and Wyoming have threatened to slap a lien on the Scotts and Tennessee went as far as to threaten to seize the Scotts’ property—all because a certified service provider the Scotts used failed to file and remit on their behalf.
“What’s real galling,” said Brad Scott, “is the amounts involved were less than $100 in each instance.” According to Brad Scott, Halstead has spent $162,000 on compliance costs to collect less than $68,000 in taxes for the states–$2.39 for every $1 of revenue.
Hear more of the Scotts’ story at the seven-minute video below. It was told to Jonathan Williams, vice president of policy for the American Legislative Exchange Council, at a recent conference held in Scottsdale.