Sales Tax And More's Holiday Message

We Wish Everyone a Happy and Healthy Holiday Season!

At the end of every year, we like to reflect and give thanks. And what a year this has been. The COVID-19 pandemic has been a nightmare for so many businesses and people. We are very thankful for being able to adjust to the new realities. Everyone here is working remotely and none of our employees have tested positive for COVID-19. However, some of our family members have struggled both physically with the disease and mentally from the forced isolation. Again, we are thankful that these family members are doing better. 

As a business, we are doing great and have expanded over the last year. We are proud and thankful that we have been able to grow and thrive during these tumultuous times. Our Sales Tax Returns Services (STRS) is one service line that continues to have explosive growth as many clients continue to realize that sometimes you just need more than a software company. 

We are thankful for our clients without whom we could not be successful. Many of our clients have been blessed with an amazing year as eCommerce has done exceptionally well. We hope this includes you. However, we realize that not all of our clients have done well. Many of our clients with physical locations have not fared as well. Even some of our eCommerce clients have run into supply and or delivery problems. We realize that many of you are looking to diversify sales channels and how you source products. We wish you success as you continue to adjust and believe that 2021 will be a much better year for you.

While the COVID-19 crisis is not fully behind us and will continue to deliver heartache, we see light at the end of the tunnel. We hope that everyone makes it through this hopefully last phase without any additional pain or suffering.

As we enter the new year, I see a couple of trends that bear watching. The first is income or similar types of taxes. While California has fired the first shot in what we believe will be the next big battle for FBA sellers, we do not believe it will be the last. FBA sellers will be the first target because they are for the most part not protected by PL-86272, but this will quickly expand to other eCommerce sellers. 

The protections of PL 86-272 are under attack with Massachusetts claiming the federal law is unconstitutional, and the MTC looking to modernize their guidance effectively nullifying the protections. Both of these are in reaction to the Wayfair ruling. In addition, you have other states like Oregon adding a gross receipts tax which is not at all protected. The unfortunate result is that unless we see Congress step in, which is not likely based on past and current precedent, those larger eCommerce sellers will find themselves subject to income or similar taxes in multiple states and even some cities.

Another trend we believe you will see in 2021 is an ever-increasing number of states becoming a lot more aggressive in their discovery, auditing, and collection efforts. We see a “perfect storm” scenario brewing. The states know that approximately 50% of companies are not compliant with economic nexus. The states had already started gearing up for a big enforcement push prior to the COVID-19 crisis. The crisis delayed but did not cancel their efforts. In addition, states traditionally become more aggressive coming out of recessions because they need to refill their coffers quickly. This time will be no different and will actually probably be worse, as the hole is deep and the states were already planning this prior to the crisis. And while the states will primarily be looking for economic nexus, they will stumble across all types of nexus like independent and subcontractors.

We also want to remind everyone that the end of December or the beginning of January is the time to reevaluate your nexus footprint due to the economic nexus threshold lookback periods.

We are very optimistic that 2021 will be a much better year than 2020. When it comes to tax, we don’t want anyone who has persevered through 2020 and into 2021 only to be hurt by states trying to claw back from the crisis.

I thank all of our employees, I am humbled by their dedication, professionalism, continuous effort, and service. We thank all of our clients who have trusted us with their state tax needs making this the banner year it was. I can’t wait to see what we will all achieve in 2021.

Merry Christmas and Happy Holidays!

Mike Fleming

President 

Sales Tax and More