November 12th, 2018

How the Wayfair Sales Tax Ruling May Affect Your Brand

This is a guest post by Brian Sengson of Bennett Thrasher LLP.

Brian Sengson, State & Local Tax Manager
Bennett Thrasher LLP

On June 21st, a landmark court ruling significantly changed the sales tax landscape for many online retailers and remote software companies. According to the U.S. Supreme Court’s recent decision in South Dakota v. Wayfair, internet retailers can now be required to collect sales tax in states in which they lack a physical presence. In a strongly worded opinion, the Court’s ruling overturns 26 years of precedence, leaving companies to question how, and to what degree, this ruling impacts them.

What did the Wayfair ruling change?

Historically, states could only mandate companies to collect and remit sales tax on sales made to states where the taxpayer had physical presence (commonly referred to as the Quill physical presence rule). Generally, physical presence was denied as having employees or a physical location, such as an office or warehouse, in that state.

However, in recent years, states began a campaign to override the physical presence standard with a focus on online retailers. States began passing “economic nexus” laws, attempting to redefine or directly contradict the notion of physical presence. Specifically, these laws create sales tax nexus based on certain transactional thresholds.

Many regarded these efforts to tax out-of-state companies as reminiscent of “taxation without representation,” but the states had valid concerns. For example, under the physical presence standard, companies like Wayfair or Amazon had a pricing advantage compared to brick-and-mortar retailers. In a broader sense, technology companies, such as SaaS providers, were notable contributors to lost sales tax revenue — upwards of $33 billion each year.

For Wayfair specifically, at issue was South Dakota’s economic nexus law, which required companies to collect sales tax if it has at least $100,000 in sales or at least 200 transactions with customers in the state. In a 5-4 majority ruling, the Court overruled the Quill physical presence precedent and deemed South Dakota’s economic nexus as Constitutionally appropriate. The Court reasoned that the state’s law better reflects today’s economy and referred to physical presence rule as “unsound and incorrect.”

What does this mean for brands and retailers?

With the prevalence of eCommerce in the retail industry, retailers are especially at risk of unintentionally creating expansive sales tax nexus and, as a result, increased compliance measures or potential tax liability. In fact, to date, over 25 states have either passed or proposed a rule similar or even more aggressive than South Dakota’s economic nexus law — and that list continues to grow.

It is important to emphasize that these new laws often present two means in which a retailer has nexus: materiality (sales) or frequency (transactions). As a result, even if a retailer’s sales into a state does not exceed $100,000, but has 500 separate sales to the state, then the retailer will still have sales nexus. More importantly, some states’ thresholds are now as low as $10,000 in sales to have some state filing or reporting requirement.

What if I don’t comply?

Outside of an impending audit and resulting penalties, a company’s exit strategy creates another impetus for companies to further evaluate the Wayfair impact. For example, when undergoing an acquisition, sales tax exposure is a frequent issue during due diligence; often requiring sellers to put a portion of the purchase price in a holdback escrow or, at times, cancelling the deal altogether.

In no uncertain terms, Wayfair is a landmark ruling for eCommerce, online or remote sellers, with far-reaching implications. Wayfair alters the sales tax landscape, creating substantial uncertainty, and should not be taken lightly.

Brian Sengson, Esq.
Bennett Thrasher

Team Ally

Posted in Brand Manufacturers

December 10th, 2018

Top 5 Tips to Make the Most of CES 2019

Consumer tech brands, enthusiasts, and experts from around the world will be heading to Las Vegas, NV this coming January for the 52nd annual Consumer Electronics Show. CES is consistently one of the largest and most anticipated events of the year, with last year’s event welcoming more than 182K attendees and 4,400 exhibiting companies.

Whether you’re a first-timer or a seasoned pro, here are our top five tips for navigating CES 2019 and making the most of your time there.

1) Plan ahead.

We can’t stress enough the importance of setting your schedule ahead of time. It will make for a more enjoyable event and will ensure that you don’t miss the sessions you’re most looking forward to. Talk with your team, identify your priorities and objectives, and plan your week accordingly.

Pro Tip: This curated guide to CES 2019 will help you identify recommended tracks based on your industry and interests.

2) Map out your week.

CES covers 2.7 million sqft. Don’t arrive late to a session, because you couldn’t figure out where to go or didn’t give yourself enough time to get there. Find out where your sessions are ahead of time, and make note of any instances where you’ll need to give yourself time to change locations.

Pro Tip: Here are maps for Tech East, Tech West, and Tech South and an additional one that breaks down the event by product category.

3) Book meetings in advance.

From planning your schedule to mapping out your week to setting your meetings — our advice is to do as much of the heavy lifting on the front end as possible. Once you get to the event, schedules will become so busy that it will be more difficult to sync up. Go through the list of exhibitors or connect with colleagues ahead of time to see if there’s anyone you’d like to meet up with while you’re both in town.

Pro Tip: We’re now taking meetings for CES 2019. If your brand is interested in learning more about selling direct to consumer, you can reserve a time slot here. We’d be happy to chat!

4) Get connected.

Last year, the #CES2018 hashtag and @CES mentions had a record-breaking 1 million hits. Don’t overlook this easy way to connect with fellow attendees and exhibitors. Be sure to utilize this year’s official event hashtag, #CES2019, and check the feed for opportunities to connect, answer questions, and get inspired.

Pro Tip: Don’t wait until the event starts to make use of the hashtag. Go check it out now — you can see that people are already starting to connect.

5) Perfect your elevator pitch.

With more and more companies attending CES every year, there’s a good chance that you will (literally) run into someone who could lead to your next big opportunity. Practice your pitch prior to stepping on the showfloor — you’ll be glad you did.

CES is one of our favorite events of the year, and we can’t wait to see what this year brings — especially the new focus on consumer health technology. If you’re interested in learning more about eCommerce opportunities for your brand, we would love to meet up with you. Book a meeting with our team today.

Dave Kart

Posted in Brand Manufacturers