Posted on May 30, 2018
While the issue of the nexus physical presence standard awaits the much-anticipated ruling from the Supreme Court in Wayfair versus South Dakota, the general rule of thumb for evaluating your business’ sales tax collection obligations still stands – “People or Property.” If you have employees/representatives operating in a state, or assets, inventory, etc. located in a state, then you are generally considered to have a sufficient connection with that state, or nexus, for sales tax collection purposes. However, as we have seen increasingly over that last few years with waning sales tax revenue due to growth of online marketplaces, and the subsequent decline of the brick and mortar model, states are more motivated than ever to identify nexus creating business practices under the current standard.
On May 10, 2018, the Department of Revenue for Washington did just that when they released an Excise Tax Advisory identifying enhanced delivery services as a creator of substantial nexus. Enhanced delivery services, otherwise known as white glove delivery, are those where the aspects of the delivery significantly exceed those which occur with normal delivery services. This would include services offered such as unpacking, assembly, the performance of maintenance or touch ups, the removal of the packaging from the site of delivery, or even simply the placing of the shipment in the room preferred by the customer. The significant aspect of this ruling is that it dissolves the nexus protection previously afforded to remote sellers who engaged in shipping methods such as what could be considered “enhanced” through the use of common carriers. The supreme court ruling in Quill Corp versus North Dakota (1992) set the precedent that delivery through common carrier in and of itself does not meet the physical presence standard. However, this Excise Tax Advisory elaborates that Washington considers common carriers who perform these enhanced services on behalf of the seller offering them as becoming representatives of the seller through such performance. These acting representatives are therefore creating sufficient nexus for that seller.
The implications of this advisory could result in substantial liabilities for those who meet the physical presence standard as it has defined it and are not currently registered to collect sales tax. Since it is an advisory, it is simply an interpretation of a historical rule and not the establishment of a new one. This signifies that a business that delivers its products through enhanced delivery is not just liable for sales tax since the release date of the advisory May 10, 2018, but since the date of their first performance of an enhanced delivery in the state, as far back as that goes.
Tips for the Taxpayer
If you or your business are a remote seller in Washington who ships through common carrier, review your products and the process of delivery to determine if it could be classified as “enhanced delivery.” If so, determine what the first date of nexus in Washington was and if it is beneficial or possible to file a Voluntary Disclosure Agreement to reduce your liability.
How Can We Help?
Allyn International offers tax services for companies throughout the U.S. and Canada, with extensive experience conducting nexus reviews and negotiation with taxing authorities. We can perform a complete review of your operations in Washington and all other U.S. states and identify your sales tax collection obligations. Where applicable, we can conduct registrations or file voluntary disclosures on your behalf. We are committed to bringing your business into complete compliance while insuring you don’t pay a penny more than your fair share in taxes.
Allyn’s tax team is experienced in all aspects of Federal, state, and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn files state and local sales and use, property, and license tax returns in every US taxing jurisdiction in addition to excise tax filings such as Federal Excise Tax, Heavy Highway Vehicle Use Tax, and International Fuel Tax Agreement returns. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: firstname.lastname@example.org.
Contributer: Jordan Perri
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.