COOK CHAMBER OF COMMERCE: New Requirement For Collecting Local Sales Taxes On Internet/Phone Purchases


Cook Chamber of Commerce issued the following announcement on Oct. 21.

As you may know, a recent Supreme Court decision in a case called South Dakota v. Wayfair significantly changed the rules regarding when states may tax internet and phone sales (and, for that matter, mail-order sales, too).

For interstate sales, the Wayfair ruling allows states to require sales tax collection if a company sells more than some specified minimum in a state. So, for example, Minnesota has established that any out-of-state company selling more than $100,000 to Minnesota customers, or with more than 100 transactions in Minnesota, has what is called a Minnesota “nexus” and must collect the Minnesota state sales tax.

Each state must establish its own sales threshold, and in most cases they will be large enough that most Cook County business won’t need to worry about collecting sales taxes for other states. Wisconsin, for example, also set its “nexus” at $100,000 in gross Wisconsin sales revenue or more than 200 sales transactions. So unless a Cook County merchant has more than $100,000 in internet or phone sales to Wisconsin residents, or more than 200 transactions, there is no need to collect the Wisconsin sales tax.

The more worrisome aspect of South Dakota v. Wayfair for many Cook County merchants is that as a result, Minnesota also now requires each Minnesota merchant to collect local option sales taxes for sales within the state. So, for example, if you sell something via phone or internet to a person in Fergus Falls, you must collect the local option sales tax in effect in Fergus Falls. And there is no minimum: You must collect the local sales tax no matter how little you sell into a community. The Minnesota Department of Revenue requires that collection of these local sales taxes begin Oct. 1, 2018, for monthly or quarterly sales tax filers or Jan. 1, 2019, for annual tax filers.

You may read the Minnesota Department of Revenue fact sheet on this issue here: http://www.revenue.state.mn.us/…/…/MN-Sellers-Local-Tax.aspx

Because there are literally hundreds, perhaps thousands, of variations in local sales taxes across Minnesota, knowing what to collect for each sale suggests an expensive compliance nightmare for small online and phone retailers. Several merchants have contacted me to ask if the state might provide an exemption for retailers whose online or phone sales do not exceed some reasonable minimum amount. The cost of compliance, they say, would exceed what they make from online or phone sales.

I contacted Sen. Tom Bakk and Rep. Rob Ecklund with this question. Sen. Bakk’s office sent it on to the Department of Revenue, and a person from the department called to discuss it with me. No mention was made of an exemption for small merchants. Instead, the department is offering to set up a webinar for Cook County merchants that will explain how the system works. We will try to make that webinar happen as soon as possible.

Basically, however, their pitch is that they will provide software that makes it easy to calculate the local tax you must collect if you enter the address of a purchaser anywhere in Minnesota. They also offer a “Sales Tax Rates and Boundaries Table” that you can download and use to program your own point-of-sale system to collect the proper tax. Please consult the fact sheet referenced above (http://www.revenue.state.mn.us/…/…/MN-Sellers-Local-Tax.aspx) and the links it contains for a more complete understanding of what you are required to do -- plus access to the department's tax tables.

I would very much like to hear from you if you encounter any difficulties following the instructions the Department of Revenue has provided. If any of you have received helpful information from your own attorneys, tax accountants or others, please share what you can.

Original source found here.

Source: Cook Chamber of Commerce

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