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Remote Sales Tax Resources

Red neon lighted sign that reads "TAX" on it.
Red neon lighted sign that reads "TAX" on it.

ACMA’s Remote Sales Tax Collection Work

Since 2013, the ACMA has been active in trying to bring about a fair means of enabling all sales tax collecting states to collect in a fair and reasonable way from remote merchants doing business in such states. From 2013 until the 2018 United States Supreme Court’s overturning of the Quill precedent in South Dakota v. Wayfair, the ACMA led a coalition called True Simplification of Taxation, which effectively held off a Goliath-like onslaught to overturn Quill.

Ultimately losing the Wayfair case by a 5-4 vote, the ACMA abruptly shifted gears in an effort to make sales tax collection an easy and relatively inexpensive endeavor. On this website, we lay out all the issues involved and ACMA’s stance. Links to relevant documents, news articles, and the like appear below each section under “resources.”
On June 21, 2018, the Supreme Court overturned decades of precedent with its decision in South Dakota v. Wayfair. States could now extend requirements for collecting and remitting sales and use taxes to sellers with no physical presence within the state’s borders (aka: “remote sellers”). Writing for the majority, Justice Anthony Kennedy suggested that the following considerations would make a remote seller sales tax law Constitutionally valid:
Since the 2018 ruling, those considerations have been – at best – only partially and haphazardly met. The ACMA’s position is that the resulting system is unfair, unworkable and presents an undue burden to commerce across state lines, and it can only be fixed by Congressional action.
Complying with sales tax regulations across state lines is a daunting task. As of October 1, 2020, there are close to 16,000 state, local and special district sales tax jurisdictions across the US. Michigan has one; Missouri’s Department of Revenue lists 2,427 total jurisdictions, though “only” 1,729 impose a unique sales tax.
Each jurisdiction has its own rates, definitions of what is taxable, reporting and filing requirements, audit procedures and penalties. If that was not enough, these are always changing. For instance, in just the first six calendar months of 2020 there were 327 total new county/city/district sales tax rates, or changes to existing rates, across the US. Many states provide one point of entry for remote sellers to register; however, some of the states with the most taxing jurisdictions, such as Alabama and Colorado, require remote retailers to register with individual local home rule jurisdictions or their agents.
Of the 38 states with multiple sales tax jurisdictions, only three (so far) have made any effort to provide a simplified tax rate structure for remote sellers. In Alabama and Louisiana, the simplified rates are only available to sellers that do not meet the economic nexus thresholds but are collecting and remitting voluntarily. Thus, in practice, Texas is the only state to have a simplified local jurisdiction rate for remote sellers. Click here to view a US chart showing each state’s count of jurisdictions.
There is little to no uniformity across the country in what goods and services are taxable. For instance, delivery charges (“freight”) may be fully taxable, or…

A live tomato plant may be taxed as food in one jurisdiction, as an agricultural product in another, and tangible personal property in a third.

Who pays, and who is exempt? Individuals, entities and organizations that are required to pay sales tax in one jurisdiction may not be required to do so in a neighboring jurisdiction. For instance, Federal government entities are not required to pay California sales taxes, but in Arizona, the seller may pass on the charges for the state’s “Transaction Privilege Tax” to certain Federal government customers under certain circumstances. The requirements for verifying and documenting sales tax exemptions — as well as resale exemptions for qualifying non-retail sales — vary by jurisdiction too. On top of that, most states will not accept a reseller or exemption certificate issued by another state.

How is “significant economic presence” defined in each state? When the Supreme Court in Wayfair struck down the requirement for retailer to have a physical presence in the jurisdiction before it could be required to collect and remit sales tax, it suggested that establishing a threshold of “significant economic activity,” such as South Dakota’s $100,000 in retail sales or 200 transactions would pass Constitutional muster. Of the 45 states (plus the District of Columbia) that have statewide sales taxes, 42 have enacted “Remote Seller Economic Nexus” laws. (Kansas has, to date, not passed a nexus law but the Kansas Department of Revenue claims the authority to require remote seller collections without one). Each state’s threshold is based on a certain level of sales, a number of transactions, and/or both, but the level of economic activity deemed “significant” varies. For instance, Illinois’ economy (as measured by annual GDP) is nearly 17 times greater than South Dakota’s, according to Statista, yet its economic nexus thresholds are nearly identical (based on $100,000 in sales or 200 transactions).
Further, there is no common definition of what sales count toward these thresholds — gross sales, retail sales, taxable sales, just taxable sales of tangible personal property, etc.

The list of thorny issues remote sellers face goes on:

This byzantine system of state and local sales taxes has always been predicated on the notion that all sales are local. The fabric store on the corner can manage one city’s taxes; the furniture store next door can handle two or three local rates for the towns they deliver into. The only way a remote seller can navigate the bewildering array of jurisdictions, rates, taxable products and services, thresholds and records requirements is with specialized software.

As you navigate sales tax collection from the 45 states, it’s worth reviewing this flow chart from the Illinois Department of Revenue provided you take the following into consideration: While mostly applicable beyond IL, the language used by each of the states needs to be investigated thoroughly. It’s strongly advised that you review this page from the IL DOR’s site for details. Most notably, review the question “What sales are excluded from the threshold determination?” And keep in mind that each state’s language is unique to that state. They may use the same words, but the definitions differ.

The complexity of collecting and remitting sales taxes across state lines is no secret – in fact, it’s a selling point for the software companies and consultants which specialize in the field. The software company Avalara, regarded by many as an industry leader, boldly proclaims “We live and breathe tax compliance so you don’t have to.” Avalara and its peers are businesses, not charities, and their expertise comes with a steep price in direct, indirect and opportunity costs. Despite the claims, there is no “free” software available for all remote sellers. In theory, certain states, primarily the 24 members of the Streamlined Sales and Use Tax Agreement (SSUTA), will subsidize the software and services of a select group of “Certified Service Providers.” However, this is not available for the states with the largest economies (California, Texas, New York, Illinois, et al.) or most complex taxing requirements (Alabama, Colorado). And even in states where the CSPs are “free” for remote sellers, there are still restrictions that incur out-of-pocket expenses, such as limits on API calls or non-taxable transactions.
Then there are the costs – in money, time, and staff – to integrate the sales tax processing software with the seller’s systems. Many, if not most, catalogers rely on home-grown enterprise systems built up over years. Programming these legacy systems to work with available sales tax software has proven – in practice, repeatedly – to be hugely expensive and time consuming. This is a particular burden on smaller companies, where the IT and accounting “departments” may well be just one person each.

The costs continue even after the software and procedures are in place, and the staff trained. Someone has to compile the information for the returns, and then send that information to the states. Filing through the SSUTA architecture is subsidized by the member states; however, all CSPs charge to file on a seller’s behalf in the non-member states. Sellers are protected from liability for a CSP’s error, either in calculating or remitting taxes, in the SSUTA states; this not necessarily true throughout all the non-member states, so the prospect of back taxes and penalties is a profound concern.

Often overlooked in the debate are the opportunity costs imposed on remote sellers by this needlessly complex sales tax landscape. It is a “zero-sum game”: every resource devoted to sales tax reporting and collection is a resource that is unavailable to other vital business functions. Every dollar spent on compliance is a dollar that can’t be spent on hiring; every hour spent is an hour that could not go to marketing, or customer service, or inventory management.

The South Dakota law upheld in the Wayfair case established a “safe harbor” for sellers with “limited economic activity” in the state. The thresholds, $100,000 in gross sales or 200 individual transactions, were based on the size of the state’s economy and were intended to prevent an undue burden on out-of-state businesses.

Since Wayfair, some variation of $100,000 sales or 200 transactions have become the de facto thresholds across the country, without consideration of the size of an individual state’s economy or tax base. Thus, 201 retail sales of a $5 item into Illinois over the course of 12 calendar months (for example) would trigger economic nexus; if tax was collected on all 201 sales the state would get $65.33 in sales taxes.

This is a very shallow “safe harbor.” South Dakota also explicitly stated its intent to require registration and collection prospectively from the date its law became effective (ultimately November 1, 2018), and not seek taxes retroactive to any previous date. This has not been the case with every state. Massachusetts, in particular, has asserted the right to look back to at least the calendar year prior to October 1, 2017, when its remote seller law became effective. New York, which has had a remote seller law on the books for decades, has not yet stated whether it will seek retroactive taxes. This is a nightmare scenario for a remote seller. Did the customer pay the appropriate use tax at the time? Will the customer do so at this date?

In the time since the Wayfair ruling, many remote sellers are not collecting sales taxes as they should, a problem that is only increasing as the 2020 pandemic drives more brick-and-mortar stores online. A recent survey of 750 businesses with sales in more than one state indicated that almost 70% (over the course of the four months of the survey) were unaware that it means they may have to collect and remit in every state in which they have sales.
At the other end of the spectrum, only one in four state departments surveyed were even tracking the number of remote sellers that were remitting sales taxes. The Illinois Department of Revenue, which does, reported only 4652 remote sellers filing as of December 31, 2019. There are surely more businesses than that selling into the sixth most populous state in the nation.

The Supreme Court’s decision in Wayfair rests explicitly on two main arguments: each state’s right to collect sales and use taxes from their citizens regardless of the method of the transaction, and the desire for “marketplace fairness” between e-commerce and “brick and mortar” sellers. There is no dispute that states are entitled to their sales and use taxes. Moreover, since states have always “deputized” sellers within their borders to act as their agents and collect/remit the required taxes, there is – in theory – no compelling reason why a remote seller should not be required to do the same if the ability to do so exists. (It’s the current practice, not the theory, to which we object.)

The idea that e-commerce sellers had a significant advantage over businesses with a physical presence solely, or even largely, because they were not required to collect sales taxes, however, has never had much basis in reality. E-commerce sellers are not reliant on local foot traffic for business; they can be open 24/7 without additional staff; they can specialize in niche products that would not be profitable in their local geographic area; and they have the potential to benefit from economies of scale similar to what “big-box” retailers possess. Sales tax is an afterthought compared to these factors.

The SSUTA was the result of an initiative by the National Governors Association and the National Conference of State Legislatures to simplify state sales tax collection and provide justification for Congress to pass legislation overturning the Supreme Court’s rulings on physical presence. It is similar in concept to the Interstate Fuel Tax Agreement (IFTA), which began as a multi-state compact to simplify motor fuel use tax collection for the trucking industry, and was codified into US law in 1991.

The SSUTA focuses on “four major requirements for simplification of state and local tax codes: 1) state level administration, 2) uniform tax base, 3) simplified tax rates, and 4) uniform sales sourcing rules. The agreement simplifies both the registration and filing process for businesses making sales in multiple member states by providing one portal for both. It also provides remote sellers access to state-subsidized sales tax processing software from various Certified Service Providers (CSPs) at no charge, under certain conditions. These advantages – “free” software, simplified rates and simplified registration and reporting – were explicitly cited by the Supreme Court as reasons why South Dakota’s remote seller law would satisfy the Commerce Clause’s prohibition against “undue burdens” in interstate trade.

There are a number of drawbacks to the SSUTA, however. Not only are there just 24 member states, but that number does not include the largest sales tax collection states by population: California, Texas, Florida, New York, Illinois, and Pennsylvania. What’s more, no states have joined or applied to join since Wayfair was decided, as there’s simply no incentive to do so any longer. Furthermore, SSUTA guidelines and requirements are not codified into law and may be changed without warning by the Streamlined Sales Tax Governing Board, which has no business representation (there is a “business advisory board” whose membership is voluntary and can only make “recommendations”). Finally, as a practical matter, remote sellers who register through the SSUTA must register with all member states, not simply those where they meet a threshold or even conduct business. Thus, they incur reporting obligations and audit liability in states where they would otherwise have none.

The Interstate Income Act of 1959, also known as Public Law 86-272, restricts states from collecting income tax on sales of tangible personal property solicited by remote sellers within its borders, as long as the orders are filled or shipped outside of the state. The Wayfair ruling has given many states an opening to skirt this law by means of economic nexus. For instance, Texas imposes a “franchise” (privilege) tax based on income derived within the state on “each taxable entity formed, organized or doing business in Texas.”

Per the Texas comptroller, “Each taxable entity with nexus must file a Franchise Tax Report and a Public Information Report or Ownership Information Report and pay any franchise tax due.” The Pennsylvania Department of Revenue asserts “the decision in Wayfair has made certain that, at least prospectively, no physical presence standard exists for purposes of limiting the ability of a state to impose a net income tax on an out-of-state taxpayer so long as the constitutional requirements under the Due Process and Commerce Clauses of the United States Constitution are satisfied.”

These attempts at “taxation without representation” are just the tip of the spear. If states can impose income taxes by virtue of an arbitrary economic nexus threshold, what other taxes and regulations are next?

Since at least 2010, there have been repeated efforts to legislate national sales tax policy – often under the banner of “Marketplace Fairness.” Since Wayfair, at least six bills have been introduced in Congress that would require any nationwide sales tax regime to be predicated on simplification of rates and regulations, as well as no retroactive enforcement.  Few made it out of committee and none have been passed, primarily because of opposition from the states and reluctance in Congress to “tell the states what to do” despite the fact that Congress has the explicit right under the Commerce Clause to regulate commerce between the states.

The National Council of State Legislatures (NCSL) has been a strident advocate against Federal legislation in this arena. It has opposed every effort at sales tax collection reform since (at least) the Wayfair decision was announced. As its policy position states: “NCSL strongly opposes any federal effort that would limit or delay the ability of states to collect sales taxes from remote sellers.” NCSL has opposed multiple bills that would have required simplification of sales tax regulations for remote sellers and prohibited retroactive enforcement of such laws. In short, the NCSL stands firmly opposed to the components of Federal law that the Supreme Court explicitly stated would pass Constitutional muster in its Wayfair decision.

As it stands, the current system does not benefit the states and actively harms businesses. States are getting only a small fraction of the tax revenue due to them. Remote sellers are faced with the choice of expensive and difficult compliance on their own; selling through a marketplace facilitator such as Amazon or eBay, with all the challenges those and others pose, or throwing in the towel.

It doesn’t have to be this way. The IFTA provides a model. Like the SSUTA, it started as a compact between a handful of states looking to streamline a hideously complex and grossly inefficient cross-border tax regime. The IFTA also provides a precedent. Congress wrote it into law with the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), giving non-member states five years to get onboard and providing assistance to do so. While not perfect, the SSUTA provides a structure so the wheel does not have to be reinvented, just tweaked. The SSUTA members also have a uniform definition of taxable products and services. Texas, Alabama and Louisiana have shown that a single rate per state is both possible and practical.

There is no reason, in theory, why a one- or two-page “EZ” report is infeasible if rates are simplified. Each state’s taxing authority already has established relationships with businesses within the state, so no new bureaucracy is required if a remote seller reports and remits taxes collected on out-of-state sales along with in-state sales. States already have established procedures for distributing motor fuel use taxes to the others. Without action by Congress, however, the states have little incentive or appetite for the work necessary to overhaul the current system.

Unity, uniformity and simplicity are crucial for a sound, constitutionally valid remote sales tax regime. Therefore, the ACMA supports legislation that incorporates the following principles:

Catalog Industry Action Funds

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Support ACMA’s Industry Action Funds

You can assist with specific areas of ACMA’s program of work by providing much-needed resources dedicated to a particular issue. Our Industry Action Funds are segregated accounts held by ACMA, made available as a “war chest” to deploy on specific issues that impact direct and remote marketers and their suppliers — eliminating the time and effort needed to raise funds in the heat of battle.


Please note that your contributions to ACMA Action Funds will not be used for any general ACMA “corporate purposes” other than a 5% service fee on funds raised and administered. Non-ACMA members are always eligible to make one-off donations. Such contributions support our network of consultants on whom we depend to advocate for the interests of direct and remote marketers and their suppliers. These funds are only used to pay for out-of-pocket expenses of the specific issues outlined below. Large volume donors may be considered for Steering Committees of each Fund. Click here for more information on how the funds are distributed and used.

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Description

Restricted Status: Each Fund will be separately administered as restricted under the direction of the ACMA Board of Directors by the ACMA Treasurer and our association accountant. An elected Officer from the Executive Committee or the ACMA Board will authorize disbursements. Details on expenditures will be made available to any material contributor on request. Restricted funds may be released only upon authorization of the benefactor or in the event the contributing entity is defunct, by vote of the ACMA Board.

Use of Funds: Moneys from each fund may be used for hiring lobbyists, economists, attorneys, consultants, public relations or government relations personnel, conducting research or other surveys highlighting positions favorable to cataloging, supporting coalitions or other groups allied to our positions, paying for advertising aimed at influencing elected officials or other stakeholders, organizing grass roots outreach, education or advocacy in support of public policy positions or for other tactics favorable to ACMA policy positions. Money raised will not be used to support any political candidate or political party; these moneys must come from a Political Action Committee.

Lynn Noble

President & Executive Director

New Member Development & Acquisition; Postal Affairs

Lynn Noble is ACMA’s Vice President, Industry Relations, having joined the ACMA in May 2015, following an extensive direct marketing career in private industry as well as the US Postal Service. He is responsible for leading the membership development efforts for the ACMA through new member acquisitions and providing enhanced member value.

Throughout his career, Lynn has held key marketing & sales positions with several leading direct marketers, as well as several high-level management positions with the US Postal Service.

In 2009, at the request of the ACMA, the US Postal Service initiated a new position of Catalog Manager to lead the Service’s efforts to stabilize and grow the catalog industry. Lynn returned to the USPS to lead those efforts and was instrumental to developing a stronger industry partnership between the Postal Service and the catalog industry. Serving as the product manager for catalogs, Lynn helped to raise the awareness of catalog-specific business challenges within the executive ranks of the USPS. During his tenure, the ACMA and catalog companies enjoyed a collaborative and progressive environment that produced more stabilized rates and inclusion in key USPS promotional opportunities.

Just prior to joining the ACMA Lynn was the USPS’s Manager, Strategic Account Operations, leading a team of senior sales professionals who focused exclusively in the Catalog, Mail Order, and E-commerce arena. In addition to his Postal positions, Lynn previously held key positions with leading direct marketing companies, including Cox Target Media, Market Logic, Catalina Marketing, Freesamples.com, and Advantage Direct.

Paul Miller

Vice President & Deputy Director

Association Matters, Marketing / Communications, Membership Relations

Named Vice President & Deputy Director in January 2010, Miller came to the ACMA following a lengthy career of more than two decades following the catalog/multichannel/e-commerce/retail businesses. Reporting to ACMA president & executive director Hamilton Davison, Miller oversees marketing and communications, membership development, and organizes and oversees ACMA’s National Catalog Forum, while working with Davison on most of ACMA’s postal-related efforts.

Miller started his career as a reporter with Catalog Showroom Business, following a form of retailing that was led by the likes of the Service Merchandise and Best Products retail chains.

After several years of editor/reporter roles with business magazines that followed the toy and gift industries, Miller was named associate editor of Catalog Age magazine (now Multichannel Merchant) in 1986. He rose up the ranks at Catalog Age over the next 18 years to be the magazine’s senior news editor.

Beginning in the late ’80s, Miller became Catalog Age’s postal beat reporter, where he’d follow key postal events and pull out the key catalog mail-related issues for readers. During that time, he attended many Mailers Technical Advisory Committee (MTAC) meetings and National Postal forums.

After leaving Catalog Age in 2004, Miller consulted with several catalogers and multichannel suppliers for a time, he was named news/website editor at Commercial Property News. Less than a year later, he was asked to take the reigns at Catalog Success (now All About ROI) where he served as editor-in- chief from 2006 till the end of 2009.

 

Mike Plunkett

President & Executive Director

Washington, legislative, lobbying matters

ACMA appointed Michael K. Plunkett as its President and Executive Director in January 2024, succeeding founder Hamilton Davison. Mr. Davison moved on to own and run a company. Mr. Plunkett brings years of executive leadership experience having been the President and CEO of the Association for Postal Commerce (PostCom) since 2017.  In the newly-formed dual role, he will continue his current role with PostCom and the two organizations will operate separately.

During his tenure, PostCom has continued to lead the mailing and shipping industry on policy and regulatory matters and to work with Government agency partners to advance issues of importance to members. Mr. Plunkett is also President of the Delivery Technology Advocacy Council, a nonprofit launched in 2020 to concentrate on delivery and logistics technologies.

Prior to PostCom, Mr. Plunkett accumulated more than 25 years Postal experience with the United States Postal Service in numerous executive roles in operations, marketing, product development and pricing.  As a leader within the Postal Service’s management team, Mr. Plunkett developed a well-earned reputation for innovation by leading efforts to develop pricing agreements for domestic services and in the development of the forever stamp and the priority mail flat rate box.

Mr. Plunkett has testified on pricing and policy issues before the Postal Regulatory Commission and Congressional subcommittees.  He has authored and presented papers on postal policies, economics, and operations for National and International conferences.

Mr. Plunkett holds Masters Degrees in Business from the Wharton School at the University of Pennsylvania and the Massachusetts Institute of Technology, where he was a Sloan Fellow. He earned a Bachelor Degrees in Economics and Finance from the Pennsylvania State University.