Understanding the Impact of the Quill Ruling on Sales Tax: What You Need to Know
Manufacturers often assume that they aren’t responsible for sales tax. Practically all sales made by manufacturers are supposed to be tax-exempt, after all.
What manufacturers might not realize is that business practices like drop shipping, trade show sales, and the like can create a nexus for sales tax purposes. The Supreme Court’s decision to overturn Quill could end up causing nightmares for many manufacturers who aren’t prepared for the changes that will be coming soon.
Selling directly to consumers
Sales tax typically only has to be paid once. When a manufacturer sells goods to a retailer for resale, that retailer is going to collect sales tax from consumers. In this situation, the retailer doesn’t have to pay sales tax because those taxes will be collected later on.
Any time a manufacturer sells directly to a consumer, however, they may have to collect sales tax. With Quill coming to an end, it doesn’t matter that the consumer you’re selling to is from out of state: you’re responsible for collecting sales tax. It’s the manufacturer’s responsibility to make sure that sales taxes are collected properly.
Rules for manufacturers are complicated — and so are state and local sales tax. Overturning Quill is going to make collecting sales tax complicated for retailers, especially etailers. The sheer variability of sales tax makes things convoluted, and selling through e-commerce means you may have to keep track of the different state, county, and city taxes, as well as any special taxes.
Of course, different goods may also be taxed differently depending on where they are sold. Did you know that California doesn’t collect sales tax on groceries? You will pay tax on a burger that you order at a restaurant. But if you order that burger to go, it may, again, be exempt from sales tax. Considering that retailers are used to collecting sales tax and it’s going to be a pain for them, it’s going to be that much more difficult for manufacturers to know when and how to properly collect sales tax.
Don’t panic.
Let us help. The end of Quill is giving everyone fits. As a manufacturer, it’s your job to produce goods, not to understand how each state, county, and municipality chooses to collect sales tax. Since your people aren’t used to collecting and filing sales taxes, they need support.
Fortunately, you can outsource to us. Sales Tax DataLINK makes keeping track of all of these things simple. We offer the right-size solutions with expert support. Our web-based applications stay up to date no matter how complex things get.
