Q: What is the South Dakota v. Wayfair, Inc. case?
A: On June 21, 2018 the U.S. Supreme Court found in favor of South Dakota in South Dakota v. Wayfair and determined physical presence is no longer a requirement for a state to impose sales tax collection responsibility on sellers. Physical presence meant a taxpayer had people, property or payroll within the state.
The Wayfair case introduced the Economic Nexus provisions which has significantly changed the sales tax landscape, particularly for online sellers like Neuco. Economic nexus applies to any seller which does not have physical presence in a state but meets either a gross sales and/or transaction threshold. Unfortunately, each state enacts their own legislation that defines these thresholds.
Q: What does this mean for Neuco?
A: Since Neuco ships orders nationwide, we are now required to collect and remit sales tax in states that have adopted economic nexus standards. For orders that Neuco dropships for distributors to a state in which the distributor does not reside, we will require valid documentation, such as a resale certificate, for that state to avoid potential sales tax collection implications.
Q: Does this change affect all 50 states?
A: Currently, there are 30 states that are affected, but more states have the potential to implement new sales tax requirements.
Q: How does this change how distributors do business with Neuco?
A: At the time you place your order - whether online or by phone/fax/email - we will require you to submit a valid resale certificate or alternate state approved form for the state you ship to or we ship to on your behalf. For example, if you are a distributor located in Texas and you order a part from Neuco and want it to be shipped to a customer of yours in Alabama, we will require valid documentation from you for the state of Alabama prior to the order being placed.
Q: What if I don't provide valid documentation for the state you are shipping my order to?
A: If you do not have the appropriate documentation you will have the following options:
- Neuco can ship the product to any state that you have a valid resale certificate for (typically your home state) and not assess sales tax.
- Neuco can ship to states where you do not have valid resale certificate but we will be required by law to charge sales tax at the time of the transaction.
Any sales tax collected will not be refunded or credited back to your account.
Q: How do I send documentation for my dropship states to Neuco?
Q: We only ship Neuco orders to our home state, and never ask Neuco to dropship orders to other states. Do we need do anything differently?
A: Assuming Neuco already has a valid resale certificate for your business in the state which you reside (which we should), you do not need to do anything differently.
Q: Where can I download forms for resale certificates and/or acceptable documentation for the states I ship to?
Q: I'm still confused. Can I talk to someone at Neuco if I have more questions?
A: We know this is a new concept (it is to us as well!) and some distributors may not be up to speed on sales tax laws. Please contact our Sales Tax team at (800) 323-7394
Disclaimer: This FAQ does not offer a substitute for professional legal tax advice. We recommend that wholesale distributors work directly with their tax advisors and/or consultants who can counsel you on nexus-related laws and requirements.
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