Is your ecommerce business prepared to handle new sales tax changes that multiple states are adopting? Have you been worried about sales tax compliance and find yourself desperately looking for answers? If so, you’ve come to the right place! On this episode of The Amazing Seller, you’ll hear from Scott and his guest, Martina Chavez from Avalara. In her conversation with Scott, Martina talks about the recent Supreme Court ruling involving Wayfair, the solutions that Avalara has created for sellers, what you need to do to make sure your business is in compliance, and much more. Don’t let the stress of tax stuff distract you! Get the critical information you by listening to this episode!
What happened with the Wayfair case?
If you avidly follow ecommerce news, it's likely that you’ve heard of the Supreme Court case involving the ecommerce business, Wayfair. For those of you who missed the big news, here is what happened in that case.
Basically, the ruling decided that states may charge sales tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state.
This was a major change overturning a case from 1992 which stated that the Dormant Commerce Clause barred states from compelling retailers to collect sales or use taxes in connection with mail order or Internet sales made to their residents unless those retailers have a physical presence in the taxing state.
If you are wondering if this new decision affects your ecommerce business and the state you operate out of, make sure to check out the resource that Martina and her team at Avalara put together, you can find it in the resources section at the end of this post.
How new and seasoned sellers can make sure they are in compliance.
Now that you have a basic idea of what happened with the Wayfair case, you’ll probably want to know how that impacts your ecommerce business. For sellers starting out, this process is easy, start by registering to collect sales tax in your current state (unless your state doesn’t collect sales tax). From there, depending on your volume of sales, new sellers should start the registration process for collecting sales tax in the most populated states like Texas, California, and Flordia. You can also wait and just watch where most of your sales are coming from and start the process in those states.
For more seasoned sellers, the process will prove to be a bit more complicated but not impossible! Basically, follow the same steps as the new sellers need to follow, but you also need to respond to any letters that any states have sent you regarding sales tax compliance. Another good option for many seasoned sellers to submit a Volunteer Discolusre Application (VDA) that allows you to get into compliance with a large up-front sum of money that you have to pay.
The information that Scott and Martina have provided regarding sales tax compliance is only a starting place for sellers like you. Make sure to consult with your professional accountant to ensure that your business is on the right track.
Tax compliance solutions from Alvara.
Let’s face it; all this tax talk is complicated, confusing, and often overwhelming. What if there was a way to cut through all the complexity and trust that all of your tax obligations were taken care of? Good news! The folks at Alvara have worked hard to create a whole line up of solutions that small business ecommerce sellers like you can use.
You can let Avalara handle your sales tax compliance and get more accurate bookkeeping in the process. Avalara can automate sales tax rates, prep, filing, and payment. To hear more about Avalara and the amazing work they are doing to help small business owners, make sure to check out the link to their site located in the resources section below!
OUTLINE OF THIS EPISODE OF THE AMAZING SELLER
- [0:03] Scott’s introduction to this episode of the podcast!
- [3:30] Scott welcomes his guest, Martina Chavez.
- [8:15] Martina talks about the recent case involving Wayfair.
- [17:15] Tax talk is scary only when there is no solution. Martina talks about solutions.
- [25:15] What should new sellers do to make sure they are in compliance with tax rules?
- [31:30] How current sellers can get their business into compliance with tax rules.
- [39:00] Martina talks about how Avalara can help sellers like you.
- [46:50] Closing thoughts from Scott.
TRANSCRIPT TAS 642
TAS 642: SALES TAX and Best Practices for Ecommerce and Amazon Sellers (2019 Edition)
[00:00:02] Scott: Well, hey, hey, what’s up, everyone? Welcome back to another episode of The Amazing Seller Podcast. This is Episode #642 and today we’re going to be talking about another non-sexy topic…
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…but a very, very important one, one that a lot of people don't want to talk about because they just don't want to talk about it. It’s a mess and people don't know what it really means, when they should be doing this, and what I'm talking about is sales tax. Yeah. That's right. I get a lot of questions, a lot of questions about sales tax, and things have changed in the past 12 months and actually we can thank Wayfair because of that because Wayfair had a lawsuit and they went to court over it and, well, they lost and now that brought a lot of attention to the e-commerce world, Amazon sellers, you name it, anyone that is selling physical goods in multiple states. Well, this is going to be your sales tax and best practices episode for 2019 so you're going to want to listen.
Now, one thing I will say. I invited on a guest and her name is Martina Chavez from Avelera who that's what they do. They specialize in sales tax. So, I decided to get Martina on and really answer a lot of these questions, talk about the most recent lawsuit with Wayfair and how that really shook up the market but then also what we should be doing as new sellers, as sellers that are growing, and then sellers that have already been doing well over the past three-plus years and now what should they do? And that's really what we dig into. So, this is going to be a very, very deep dive into this topic, into this scary area, which after you listen, you’re going to see that it's not that scary, and there are some things that we can do and there are some thresholds if you're a new seller that they have in place that, well, you don't really have to worry about it quite just yet.
[00:02:01] Scott: Now, you will want to worry about it later and you will want to be compliant and that's really what this episode or was created for because I want to make sure that you guys get the right facts. And just to kind of throw it out there though, guys, I mean, we are not legal advisors. This is not legal advice. This is coming straight from Martina who works in the trenches day after day with other businesses and with her company that she works for, Avelera, and that's why I wanted to get her on to really kind of dig into these questions and really demystify some of the things that you might be thinking and things that were the way they were maybe 18 months ago are not the same, right? Things have changed since this big lawsuit. So, that's what we’re going to do in today's episode.
Now, before we do jump in, let me remind you the show notes, you're probably going to want to go over the show notes on this one and that is TheAmazingSeller.com/642 and then this way here, you can get all the links that we talk about there and then you get all the information about the resources that she mentions that you can go and do some of your own research as far as where you are and in your business. But then also you can see some these thresholds that they put in place on these states and also see what the nexus is and where and where it applies and where it doesn't apply, all that stuff can be found in the show notes, in these resources at TheAmazingSeller.com/642. So, I'm going to stop talking so you can listen to this deep dive, this conversation, this chat that I had with Martina Chavez.
[00:03:39] Scott: Well, hey, Martina. Thank you so much for coming on the podcast. We get to talk about this sexy topic of sales tax. How are you doing this morning?
[00:03:46] Martina: I’m doing really great. Thanks for having me, Scott. So good to be here.
[00:03:50] Scott: Yeah. I know and you and I were talking briefly. You’ve got a few dogs there. I got dogs. We’re trying to manage the morning but everything is running good now. So, what I want to do though and I don't want to take up too much of your time but I do want to really dig into sales tax. It's a big topic for a lot of sellers and I know there's a lot of like I don't really want to mention that because I'm not sure if I should. We don't know the right rules. What's nexus? Like, what's all of these different terms. So, what I really want to do is have you kind of break it down, let us know what you know what your company does and try to demystify some of this stuff that we’re hearing and really how to protect ourselves and do the right things. I think that's really what I'd like to do. So, maybe give a little background on you and how you can help us.
[00:04:38] Martina: Yeah. Absolutely. So, I work for Avelera. We are a sales tax new client software. It's software-as-a-service. We do offer some professional services so we dabble a little bit on the advisory side, but primarily we’re here to automate the compliance needs around sales tax globally and I’ve been with Avelera for five years now. So, when I started with Amazon and kind of the world of online selling was really starting to unfold in a bigger way than it ever had before, and I got to enter the marketplace if you will from the sales tax compliance side earlier on and then over the last, really the last four years up until last June, there was just this building, building, building momentum around what do sales tax compliance look like for the Amazon seller, the marketplace seller, the e-commerce seller, anyone who’s selling remote from your computer, and it’s changed so dramatically since I've been with the company.
It's really interesting to be a part of it so I’ll talk a little bit about kind of the ruling that passed last June which is the most prominent rule in Wayfair that is affecting online sellers these days in a really real way but just leading up to that ruling I’ll just say that I think we all know, and we all understand that selling online is a real thing. It's not kind of the hobby deal that it used to be once upon a time when people were just selling random CDs and books on eBay and Amazon, right? People are really taking it seriously as a business and as you know, it can be a very flourishing business. People can really do well for themselves and be independent and that’s super cool. So, global commerce is completely being flipped on its head as far as what people expect from merchants who are selling online.
[00:06:37] Martina: And by people, I mean what states, what governments are expecting from people who are selling online because these are legitimate businesses that need to be taken seriously. And since people are selling online now, there’s less commerce happening in the brick-and-mortar physical ways in our local jurisdictions all over the US and globally. So, I’ll talk a lot more probably about the US. That's my expertise and focus but we definitely support global sellers and people who are trying to sell internationally whether it's US outside into the EU and beyond, or vice versa. But it's really interesting and I'm sure, I mean, I feel really nerdy about it because I just think it’s so interesting to watch it all unfold. States have decided that they finally are figuring out, “Hey, we’re losing money. Like, what do we do? We have to change the rules here,” and they have. So, that's what's happening right now. And happy to just kind of jump into what happened last year.
[00:07:40] Scott: Yeah. Let's do that. I'm curious on the Wayfair thing. It's funny because my wife and I had been doing a lot of shopping on Wayfair lately. We’re actually remodeling a lake house that we’re turning into an Airbnb and we’re totally furnishing this place and we’re buying almost everything through Wayfair just through furniture and just a whole bunch of stuff. And so, I'm curious because when you sent over like some things we could talk about like the recent Wayfair ruling I’m like, “Oh, I want to know about that.” Like, so what happened and how did this throw the marketplace into a frenzy or into a loop where you're like, “Oh my gosh,” like okay they’re bringing awareness to this and now we’re going to have to actually be careful ourselves?
[00:08:23] Martina: Yeah. So, what happened was Wayfair, South Dakota actually took Wayfair, Inc. to court, to the Supreme Court of the United States saying, “Hey, we think that Wayfair and marketplaces at large should have to collect and remit sales tax if they are selling physical goods into our state. It doesn't matter if they have a physical presence which in the past has been defined kind of in different ways by different states but loosely definitely if you have, if you lived somewhere that’s a physical presence. If you have an office or headquartered somewhere, if you have a warehouse or if you're storing inventory in a warehouse which is where it gets into that crossover into fulfillment centers by Amazon. That’s been a big eye-opener for a lot of people, selling online through Amazon specifically.
So, physical presence can be defined in a lot of different ways but South Dakota said, “Hey, we don't care about physical presence. We actually care just about the fact that you're selling into our state and we think that you should be collecting sales tax and remitting that sales tax to us based on your sales.” And because, of course, Wayfair said they’re selling high-volume, high dollar amount. It’s a lot of money so it’s significant enough to bring it to the supreme court. And so, lo and behold, there was this period of time where people, online sellers, Amazon sellers, marketplace sellers were just kind of waiting to see what this ruling was going to do. A lot of people speculated that it would actually reverse the quill ruling which would mean that they as far as physical presence is concerned that if they weren't physically located in the state that the whole warehouse deal would kind of go out the window that they wouldn't have to worry about it unless they actually lived in the state and that's not what happened.
[00:10:18] Martina: So, what happened was South Dakota on June 21, South Dakota or the Supreme Court ruled in favor of South Dakota. South Dakota won. And so, that meant or what that means is that South Dakota legally can enforce the collection of what is being called economic nexus or remote sales. So, economic nexus is the term that’s being used for remote sellers to oblige by collecting sales tax in the state of South Dakota and there’s threshold. So, the threshold there’s 200 based on volume and revenue and for South Dakota, it's 200 units or transactions and $100,000. That's what most other states are kind of formatting their economic nexus rules around but some states are a little different.
So, since last June a whole slew of other states adopted the same exact policy which is really throwing, like you said, throwing people for a loop because all of a sudden, there’s just this whole new world of sales tax compliance that people have to really take seriously because it is a law now. The Supreme Court passed this law saying, “Yep, we agree with the state. So, one by one as states have been following suit alongside South Dakota, we've been keeping track of all of that on our end, updating our software so that our software understands the different rules and the different thresholds and support our clients and all of that, and we have this pretty great webpage that I’ll be sharing with you, guys, so that you can take a look at all of the states that have now enacted their own economic nexus, rules at hand, the thresholds, and the dates for this ruling to be effective. Because like for South Dakota, it wasn't an overnight thing. The ruling passed on June 21, but it wasn't enacted immediately on June 21.
[00:12:25] Martina: So, I’m just actually looking at this right now. So, November 1 is the date that they put out there that people had to actually start complying.
[00:12:35] Scott: Okay. So, yeah, I mean so Wayfair doing a lot of volume they kind of brought awareness to at the states. They’re like, “Oh my gosh, like we’re losing money. No one’s buying stuff in our state anymore. Where are they buying? Wayfair. All right. Cool. Let’s go after them.”
[00:12:48] Martina: Right. Exactly. Totally. So, they went after a big fish and they won and it's trickling to everyone now who is selling and part of that marketplace space and remote selling space which we know there's millions of people so this is really affecting a huge number of people but because the thresholds are there, that is something to especially for new sellers, this is something to really kind of take a breath. You don’t have to be terrified right away like, “Oh my gosh.” This is one of the biggest questions we get from newer sellers or people who are new at being in the last year even of selling online. People think that they have to start registering and collecting sales tax everywhere and that's not the case. So, the good news is that there is a process to all of this. It’s not kind of all or nothing obligation.
Each business is going to have a unique set of needs around what their sales tax obligation is and that’s something that in and of itself can be complex and seemingly kind of just inundating as far as an overwhelming I guess is probably the right word but hopefully, businesses like Avelera can do for remote sellers take all that pain away. We have all the information readily available and have really easy tools to help you determine where you actually do need to collect sales tax and where you don’t and how quickly you need to get registered and will support all of those different pieces. So, hopefully, it's not as hard as it sounds but I can totally talk about some of those demystifying steps as well.
[00:14:37] Scott: Yeah. We definitely will want to do that. I know myself personally we have kind of went through the process and started to register for all those states over the years and it's a pain in the butt like totally it's a pain and California is probably the worst, the hardest, they require the most. A lot of times it’s not even online. You have to manually submit like maybe that stuff has changed. I actually hire someone personally to just file and kind of do my stuff but in the same breath, automation always sounds great because if and to me it would be like, well, why doesn't Amazon or any of these platforms, why don't they do it for us? Like, we’re still going to charge and collect but to me it would’ve seemed simpler and I don’t know, I’m just thinking of it like top level like it would just seem like the states all would have their own portal and then Amazon would collect it on their end through us, through the company and then just send them the money versus us having to do personally relying on us.
I know Amazon is trying to step back, but they are the marketplace and you would think that they should be responsible for that but they're not. We are as sellers so that is where it becomes scary. It becomes like, “Oh my gosh. I don't want to screw up.” I don’t want to get a letter and say. Oh my gosh, you haven’t been collecting sales tax and now you have to pay sales tax,” and you retroactively go back and so all of that stuff is scary for a seller and that's why they would say, “I want any part of this,” or, “I’m just not going to file and if I get a letter, I’ll deal with it then.”
[00:16:12] Martina: Yeah. I’ve definitely heard that whole kind of range of fear and overwhelm and then also people were just like staunchly compliant and they’re like, “I’m going to protect my livelihood by just playing by the rules.” And I think that my personal opinion is as a business owner that is if you take your business seriously, and you take your livelihood seriously, you have to take compliance seriously. It is no different than owning a storefront. You can't pretend and hide remote sellers. I think in the past like we kind of mentioned at the beginning of our chat is remote sellers were kind of invisible for a while. It was a very anonymous kind of thing. Everyone has screen names and you don't really know who you’re buying from but it is not that way anymore. The states are coming after individual sellers and they are putting resource into that and that does sound scary, but there's also a solution.
So, I guess like it's only scary if there's not a solution. That's my take on it but there's a solution and so that's good news. And I think they're truly right. It’s like this is one of those places of business management that isn’t the fun part. It's the necessary part. It's one of the necessary parts but it’s not the fun part. So, I love working with entrepreneurs and talking with entrepreneurs because they think that there's a lot of risk involved in going at any business on your own. You don't have the same protections in working for a company that is taking care of all those liabilities for you where you're just showing up to work and doing your job and getting paid. This is like everything is on you. And so, the risk is there. The excitement is there. It's like kind of everything that’s such a mixed bag but as much as you can offload the not fun stuff, the not sexy stuff, I think then you can run your business and actually have a good time doing it and that's what automation is all about.
[00:18:17] Martina: And if it’s not automation, it's hiring someone. It’s having someone else do it for you like you said. Yeah. And we have a tool, registration tool called business licenses that we use internally for all of our clients to help them get set up and register and I actually used it recently for myself, for California and it was such a breeze. I filled out this one form. It was like 10 minutes of my life, filled out my form. It was all the things that you normally would need for running a business. If you don't have these things like your SCIM then you’re not actually a business. But that was it, 10 minutes of my life and then over the last three weeks, they did all the work. I forgot about it and I just got an email the other day saying, “You’re done.” I was like, “That’s so great. Thanks.” It’s just one of those beautiful processes.
Yes, I paid money for it but I knew that I had to pay that money because I wasn't going to do it by myself. I just knew that so it was great to be able to just as a tool through the company that I work for and boom. Done.
[00:19:24] Scott: Yeah. I think also because whenever you get into that paperwork there’s a lot of questions that sometimes you’re kind of like, “I don’t know the answer to that.” You’re kind of like, “I don't know. Am I that type of a business?” You know, there's always these questions and then when you talk to someone on the phone, it's even worse sometimes and then you just get frustrated and you’re like, “I’ll do that later.” And then you just end up not doing it and then you put it off and I'm glad to hear that it's that easy now with California because when I was having the person I hired to do it, it was a constant back and forth and it was paper. They wouldn’t even do stuff online a lot of the times. It was like, “Oh, you go to send in this or you got to send in that,” and, “Oh, but we didn’t receive it. Well, we’ll send you another one. It’s going to take two to three weeks to get it.” It was like back and forth, back and forth and it was just like, “Really?” Like, if they want money from us, they should make it easier, right?
[00:20:11] Martina: Right. And I totally agree. Yeah. I 100% agree and I think over time, well, I hope over time that will be the case because otherwise, it'd be crazy not to go in that direction to really use technology. But actually, you're making a point that I didn’t comment on that was just around Amazon being the responsible for or supporting that effort. And you're right, Amazon doesn’t want to actually have any part of it because it is a liability and that is for them a legal matter. So, their legal team is staunchly opposed and they are working day and night to not have to take on the obligation of collecting and remitting sales tax for merchants. And merchants, the reason you are your own business is because you are the merchant of record. So, at the end of the day, everything comes back to you.
So, unless you don't want to be the merchant of record, that's really the only way at this point in time to extricate yourself from those liabilities and I think you probably know there are some states like Washington have a marketplace what are they calling it? The marketplace sales so there was intentions made by a few states in the US to require that the marketplaces that are selling within those states like Amazon and eBay, Etsy, Wayfair, etcetera, they are responsible for remitting the revenue from sales tax but they're not responsible, this is where it gets confusing for seller I think, is they're not responsible for filing the return so there's still work that the seller, that the merchant of record has to do to tell the state, “Hey, we collected sales tax through the customers that we sold to in their state. We’re not going to send you the money because the marketplace is going to send you the money.”
[00:22:19] Martina: And so, there are a few states that are doing that and that kind of is the closest thing to the marketplace taking on the obligation, but they’re going to do everything they can to not take on that obligation. That’s a big fight for them especially for Amazon specifically.
[00:22:36] Scott: Right. I understand that but if the merchant like if I don't check the boxes in Amazon to collect sales tax, then I’m not collecting it.
[00:22:47] Martina: Correct.
[00:22:48] Scott: Right? But in the same breath, I'm not like within compliance because I should be collecting it but I didn’t collect – so it’s not like I collected it and I’m holding it. I’m not submitting it. It’s more or less I'm not even collecting it so the customer is not being charged so I’m still in the wrong there too.
[00:23:05] Martina: Right. Correct. Yep. So, yeah, and I think if you're going to do one, one of those is going to happen, not collecting is the best way to go because it’s fraud.
[00:23:13] Scott: Yeah, because you’re stealing in that case. Yeah. We don’t want to do that.
[00:23:16] Martina: Exactly. It’s a felony if you collect and don’t send that money back.
[00:23:21] Scott: That would be absolutely wrong.
[00:23:24] Martina: Yes. But that’s tough though because even that side of things I think for people who just aren’t, you know, just don't really have an awareness of sales tax compliance, they could accidentally start collecting it which is on the marketplaces. It’s hard to accidentally do that. They do require registration numbers. There is some intention there. You can't just check a box and say, “Collect sales tax without or being a registration number associated with that.” So, that's good news. That's kind of the safeguard for that not happening but I think sellers who are collecting sales tax they know that goes into a separate account. It's not their money. It's the state’s money. It’s like you’re just the pass-through agent, middleman, 100%. Yeah. So, not the most fun position to be in but here we are at this point in time. Yeah.
[00:24:12] Scott: Yeah. And even just a little side note for anyone like when you're doing that even like, I don’t know, even my quarterly taxes and stuff, I’m always like taking and sliding money to the side so I’m not surprised. And so, when you’re doing sales tax, you kind of know that. You can kind of see the breakdown. You’re like, “Oh, $3,000 reflected for sales tax.” Put it in another account like don't mingle that money so that way there you’re kind of caught off guard so just a little side note for people. You have to be good with your books because you don't want to like be surprised and be like, “Oh yeah. That's right. I did collect $3,000 but I used that for inventory.” No, no, no don’t do that. So, just be careful with that. So, let’s talk about the two different types of people. There's one, just starting. Let's talk about that person then I want to talk about the person that's been selling for maybe three or four years and they’ve only been collecting in their home state and now what do they do? So, let's talk about those two. Let's talk about the person just starting right now. What's their first steps in doing this? They haven't really made any sales yet, or maybe they made a few, they got the first product up and running, and maybe they're selling a few a day, whatever. What's their best plan of action?
[00:25:22] Martina: Yeah. So, new sellers, the good news is again you’re starting from scratch so you can build with your business. Your compliance builds as you grow. And so, usually, the rule of thumb is going to be that you’re going to want to get registered to collect sales tax in your home state unless you live in a home state that doesn’t have sales tax. So, if live in Oregon, congratulations. That's great. There's only 46 states in the US that have sales tax only. I say only 46 out of 50. So, most states most of the fact they deal with the sales tax piece. So, you start with your home state and then from there so let's say you're selling on Amazon and you're using Fulfillment by Amazon to start to grow those sales. Your inventory is going to get sent to wherever the demand is.
Most often what we see is for people who are just starting out the demand is in usually the three or four biggest states and usually, it’s spread around like California, Texas, Florida, those areas. And you can watch that. You can you can see where your inventory is going through your Seller Central portal. There’s reports. We also have kind of a fancy, well, a nifty tool that will show you and it's called our inventory report and it will show you where your inventory has been spread around and revenue against it. So, that’s the next step is just to kind of watch where your inventory is going because mostly, again, we have these thresholds. And so, you don't necessarily have to start collecting sales tax in a state that you don't live in where you may be selling into in so there’s an economic nexus ruling, but if you only sold $100 worth of merchandise into California, you don't have an obligation and if you’re living in Texas. So, you do have to hit those thresholds. It’s either 200 units or $100,000 for most of the states.
[00:27:19] Scott: Some states are a little bit different and I’ll share that resource so people can come and track that but that's the first step is just determining where your home state is, easy to do, easy enough, get registered, start collecting there, and then watch where your inventory is starting to grow. And as it grows and starts to move towards those thresholds then you make that consideration. So, if you don’t ever cross the threshold in your first year of selling or second year selling, if you don't cross a threshold then you don't need to get registered. It's not until that threshold is crossed that you’ll want to get registered and you’re not going to be in trouble for the lag time that it takes in the registration process. It usually can take upwards of six weeks to finish a registration process so it’s really not an overnight thing as much as we love for that to be the case. I think that’s another thing like we’re so used to this digital, you know, like two hours I can get my prime package in two hours. And that's not the case yet with the government stuff so just know that it'll take a little time.
And then that’s kind of the starting point. So, as your business grows, your compliance will grow and I do like to just point out that it is a really good problem to have if you have to collect sales tax in all 46 states which I think I have as one company that we work who has 46 states is registered everywhere and that’s a really great problem to have because that means that you are killing it. That’s great. That's good stuff. And until you get there, like you don't have to worry about it.
[00:29:30] Scott: Okay. I love it that you’re kind of like saying, “Listen, there’s these thresholds in place. You guys have a resource too. What is the resource that people can go to? Let’s just give them that link if you have that handy. I’ll link everything up on the show notes as well but just if you have the resource page that people can kind of go and see those thresholds and some more information about this, where would they go?
[00:29:23] Martina: Yeah. So, you’ll just want to go to Avelera.com, www.Avelera.com, and then we have a little search bar or search tool at the top and type in Wayfair. You’re going to get a page that says South Dakota versus Wayfair, Inc. and has a really brief little synopsis of just what that is and a map with all the states and all of these funky nexus rulings which is actually pretty cool to look at as a visual and then there is a whole list of every state in the thresholds associated with any state that’s adopted economic nexus. So, I’ll make sure that you have the link for your community as well.
[00:30:05] Scott: Yeah. That's awesome. I’ll link it all up in the show notes and everything. So, I love it though that you said like, listen, if you’re just starting like work towards those thresholds but you don't have to panic. The first one is obviously your home state. I think, I mean, that's a given. If you're operating a business and you are like I'm in South Carolina, I'm registering in South Carolina, period. I'm starting there and then we’re going to go ahead and see where the inventory is being sold, where it's being sent, and where those sales are and then where my thresholds are. And then from there, I can start saying, “Okay. We better start registering for these states because it looks like we’re going to hit our threshold and we’re moving in that direction and start working kind of that direction versus saying like I'm just going to hit them all because I want to be safe.
[00:30:41] Martina: Right. Exactly.
[00:30:42] Scott: Okay. Cool. I think that makes people feel a little better.
[00:30:46] Martina: Yeah. Exactly. It’s just like deep breaths. And there are some states that won’t even likely register if you haven’t hit the threshold that they have determined are necessary for you to hit. They’ll be like, “No. You actually can’t register yet.” So, it’s like take a deep breath and just hold off until you really are at those levels that are required.
[00:31:010] Scott: Okay. Now, let's talk about the person that has been selling for a couple years or three years, whatever, and they’re like, “Oh my gosh, I think I better start collecting sales tax.” What are we doing here? Are we going to panic? Are we going to go to jail? Are we thinking that we’re going to get arrested like what should we, I mean, I know we should probably register but what can happen now that we haven't been doing it? Are they going to come after that company? Are they probably not? Like, I mean, I know this isn’t legal advice or anything like that so just full disclaimer out there but what are your thoughts on that?
[00:31:43] Martina: Yeah. So, that is a little different situation but, again, it is not a place to panic because there is a solution so think about it this way. At the end of the day, the states they just kind of want the money. That's really what they’re after. They’re like, “Look, if you just get in compliance, we’re not going to throw you in jail. That’s way more expensive for the state.” So, the issue is if you ignore it. So, don’t ignore it. If you get a notice from California or any other state, California is really they’re on it these days. We’ve gotten some inquiries from a lot of folks who are starting to get notices from California specifically so they passed economic nexus. And the last thing you want to do is ignore it. So, either talk to a sales tax accountant who’s an expert in sales tax and get their advice like what do we do because there's a couple directions you can go.
Sometimes people opt for what's called a voluntary disclosure agreement or a VDA and that is usually necessary for people who have been selling oftentimes more than three years but so we work with folks who have been selling for let's say like seven years, seven-plus years, and they have quite a lot of back taxes due based on states that they weren’t registered in that were supposed to be, and yada, yada. And so, there's penalties and interest that come along with not paying your sales taxes from seven years ago and that can really add up. So, a way that states are saying, “Okay. Well, we’ll make it good with you is they'll cut a deal where you have to, the accountant that you work with or the professional services advisor that you work with at Avelera would go to the state as – you would be anonymous.
[00:33:36] Martina: You're an anonymous merchant and there's the middle person working on your behalf saying, “Look, this is what is happening. This is the state of things. They owe this much. What can we do? How can we cut this down so that they can just be in compliance?” And so, usually there's a pretty big lump sum that's due all upfront in those scenarios but it's less than it would’ve been. So, that's one route and sometimes that’s not even necessary. So, there’s state and local tax and experts that we work with regularly who there are scenarios where they say, yeah, you could go that route, but truthfully if you just register from this year on and just start collecting, you should be good. So, there’s a couple of different directions and, again, that's really something you'd want to get a professional opinion around but there are ways to kind of manage that.
And I guess the caveat is because you're not a new seller, you’ve been selling for three plus years let's say. If you're in all likelihood, your inventory and your sales are living in a lot of places and maybe you’re doing quite well so that may mean that all at once you’re going to have to register for 10 states or more. I mean, that really could mean that kind of a volume and all at once it can be expensive like our services for registering per state is 199 per state. So, you multiply that by 10 and there you go. One at a time it’s a lot easier to chip away at. So, it’s always better to get started right away and just build into it but at this point, we’ve kind of hit that point as of last year where people didn’t really have to. These rules weren’t in place.
[00:35:35] Scott: And I’ll back up just for a second because economic nexus is new so people who have been selling for three plus years don't have to worry about economic nexus anywhere from any time earlier than when the states are not putting it like as of now. So, that isn’t part of their equation, which is good. The things that someone who's been selling for three-plus years will need to be considering is where they had physical presence and weren’t collecting. Yeah. We do talk to a lot of people who were like, “Yeah. We’ve been collecting in my home state for five years but my inventory has been living in California and New York and Washington and wherever else it is and I'm not registered.” So, those are the scenarios where some back taxes may be due and they may need to get registered in a pretty swift order.
[00:36:37] Scott: On something like that and I’m just, again, thinking out loud so if I was that seller and I'm like, “You know what, I haven't any notices or anything but I need to do this.” So, I’m not going to bring it to anyone's attention. I’m just going to go register and then from there start collecting. Now, someone could say, “Well, maybe that state now is going to look and see what you've done in the past,” but then they have to locate where your inventory has been and like are we going to do that? I don't know personally but should someone just say, “Listen up, from this point forward I’m just going to register,” and move on and just start collecting and not worry about like that unless I got a notice or something.
[00:37:12] Martina: Yeah. Like, my personal opinion is I think that's generally a good rule of thumb is if you start collecting, yes, you're telling the state I’m collecting sales tax. So, you're doing a good thing. You’re saying, “I'm in compliance,” and if they still take issue with that and they still want to go after you for back taxes, you deal with it when it comes. You kind of cross that bridge when it comes. They’re not going to come to your door with handcuffs after you’ve started collecting sales tax. So, yeah, that is the good news. It’s like, again, at the end of the day, states are really looking to just start having sales tax revenue come back into their state.
[00:37:53] Scott: Yeah. Now, that makes total sense. Well, this has been great. I mean, really it does seem scary. It doesn't have to be scary and I think just having you on and kind of breaking down like the basics and what it means, it does, even myself, it makes me feel better because if you are complying then, okay, great. If you're not, just start complying and like so it's not like you have to worry that like you said, someone’s going to come knocking at your door or you’re going to get this evil letter or a phone call or something like that. It just means, listen, and you guys have tools and we'll talk about that here in a minute but you have things that make it easy for us to be able to say, “You know what, take the burden off of me,” even if I have to pay something so this way here I can be in compliance and I can run my business and let that kind of be working in the background so I know that I’m compliant in the business is really where it needs to be. So, let's talk about it. So, what does your company actually do to help businesses? So, maybe you can walk us through that.
[00:38:56] Martina: Yeah. Sure. So, we do a lot of things. We are, like I said at the beginning of the call, we’re a global compliant solution software-as-a-service and I’ll keep it more specific to the remote end e-commerce marketplace sellers just because that's who we’re talking to today but especially in the US, we will support you with the sales tax calculation as needed so Amazon does the calculation piece. Once you get registered, they actually have a system in place to calculate so that's great news. You don't have to worry about that piece if you’re selling on Amazon. If you have your own shopping cart environment through like let’s say a big commerce or Shopify or Magento or whatever else, whatever other e-commerce platform you may be using or an accounting platform. We have integrations into over 500 different technology platforms. So, we’re pretty well suited to support in anywhere your business may live but think about it as end-to-end compliance.
So, we will support you with your registrations if you need that. If you need help with that professional service piece that I talked about with a voluntary disclosure agreement, we can help with that. Once you get registered then the next step is to start collecting and if you're on Amazon, the collection piece is pretty easy. Just check off the state that you need to start collecting and if you need help determining where to collect via Amazon or, well, anywhere because once you register in a state, it doesn't matter what platform you're selling into. You have to collect through all of those platforms in the same way. We can help with that as well, that nexus determination. Actually, I have a really easy to use self-serve tool online that’ll be part of what I share with you and we can also set up. We have what's called a nexus study. So, there’s self-serve products and there’s also more hands-on products as you need it.
[00:40:56] Martina: And then the calculation piece is pretty straightforward through Amazon and we have integrations for any other platform that you might need. And then the next step is after you calculate, you have to file the sales tax and so we have again we have a tool called Trust File that will file that’s a DIY. It’s our standalone filing product and that is where you would go in and all your data gets aggregated via API calls and also import your data through a CSV file and gets aggregated, knocked out where it needs to be filed, and then you can either file it on your own if you want to print out. There’s a liability form that's already pre-populated in the tool so you can print it out and send it to the state if you want to do it that way or you can click a button and have us do it for you. And we have an auto file option as well.
And then we have a fully managed returns filing services also. We have like this full range for the end-to-end and it goes from anywhere from self-serve to fully managed through the whole process and the fully managed is especially for people who are selling in a lot of states. So, think the seven-plus years of selling on Amazon and/or other marketplaces or online, in any capacity, that’s going – it’s just a lot. It's just a lot to manage. So, unless you really want to take it’s not a ton of time but it's enough and I’ve talked enough business owners that they’re like, “I just don’t’ want to do anything. I don't want to think about it. I don’t want to touch it.” That’s a managed returns solution and so that’s something that we have available too and that means we would manage all of the notifications that come back and forth from the states like all those annoying things that you were talking about. We handle that so you don't have to do that anymore. Yeah. So, that's really the end-to-end spectrum for this space.
[00:42:59] Scott: That's awesome and I love it that you guys have like a service just about for anything through that process like if you want to do it, if you just want us to do the first part, we can help. If you want us to help you register, we can. If you want to do a little bit of both like we’ll help you and you can kind of file on yourself or you can go ahead and just let us do everything. So, I love that. It’s not just like one thing and that way there as you’re growing maybe you're going to want to do a little bit yourself, but then have that calculate for you, but then eventually you’re like, “You know what, this is just not even worth my time. I’m just going to go ahead and hand it off and just not even have to do it.” So, that's really cool. So, where would someone go to learn more about the services?
[00:43:36] Martina: So, again, Avelera.com is where you’re going to want to go. In our products, we have what we call our small business suite. It has everything that you would want to know about just kind of that intense cushion. So, that’s where you would be able to access our free trials for the products. It’s where you can do a self-serve nexus study if you're curious about where you might have nexus which is that economic or physical presence nexus. It's where we have a lot of resources, like the Wayfair resource and the tools, our plans, and our pricing are up online there. So, all of that is available to you through the small business suite on Avelera.com.
[00:44:20] Scott: That’s awesome. Yeah. I will link everything up in the show notes as well. Is there anything we want to wrap up with? I mean, we just covered a ton. We went longer than I expected but that’s okay. I think we…
[00:44:30] Martina: There’s always a lot to talk about though.
[00:44:32] Scott: There is and this is always a scary mysterious topic that a lot of people don't want to talk about but I think it’s been really helpful. I feel better.
[00:44:43] Martina: Good. I’m glad.
[00:44:44] Scott: Yeah. And I feel better also that you came on and we can educate the audience and let them know and at least have them be prepared for what's to come as their business grows and how to do it in a way that you can feel like you're protected in a sense that you're doing things with a compliance. So, is there anything else you want to leave people with before we wrap up?
[00:45:03] Martina: I think we really covered the whole gamut. I think the only thing I like to say is just like this is those moments where it can feel overwhelming when you first start thinking about it all but it’s just take a deep breath and know that there are solutions and there really are, I mean, whether it’s Avelera or there are solutions out there that are built to support you with this complexity and you don’t have to do it by yourself and it's a lot less scary than it seems in the outside.
[00:45:35] Scott: Yeah. Again, I think having you come on has really helped kind of demystify a lot of this stuff and just bringing awareness to what you should be doing and as a new seller or a seasoned seller what you should be doing. So, Martina, I want to thank you for coming on. This has been awesome. And again, I will link everything up in the show notes for everyone and again if people want to hear more about your service, go to Avelera.com and that resource will be there as well. So, thanks again, Martina. This has been awesome. I'm sure we’ll be in touch again. Might have you back on, do some updates or something but I really appreciate you coming on.
[00:46:16] Martina: Thank you so much, Scott. It was really, really great to be on and I think I’ll see you at Sellers Summit as well so that's coming up soon and looking forward to that but would love to be back on for updates as they come up and feel free to reach out to me directly. If anyone in your audience has a specific question, I’m more than happy to be a resource. I can be reached at email@example.com so another option.
[00:46:37] Scott: Awesome. Yes, I will see you there and, yes, if anyone is listening that has any questions, definitely reach out to Martina. All right. So, Martina, thanks again. I appreciate it.
[00:46:48] Martina: Absolutely. Thank you, Scott.
[00:46:51] Scott: All right. So, there you have it. Another great conversation. I don't know about you but I feel like I can take a deep breath now because, yeah, that is a scary topic to a lot of people and having Martina on really did demystify a lot of it for us and you know keeping us up-to-date on what are the best practices. When should we be starting to file and collect sales tax? What is it mean for our business where it is today? All those questions were answered and I'm really, really glad that she came on and really demystified a lot of the things that people might be assuming and really broke that down. So, I would definitely check out the resources to this one. You can find them by heading over to TheAmazingSeller.com/642 and then also I will link up how you can get in touch with her. If you have any questions, feel free to reach out to her and ask any of those and really look at those resources that they compiled on their website as well so definitely check that out.
All right, guys. So, that is it. That is going to wrap up this episode. Remember, as always, I’m here for you, I believe in you, and I am rooting for you, but you have to, you have to, come on, say it with me, say it loud, say it proud, take action! Have an awesome amazing day! And I’ll see you right back here on the next episode.
LINKS MENTIONED IN THIS EPISODE
- Avalara’s Small Business Solutions
- Wayfair (Economic Nexus) info:
- Small Biz Resource Page/Free Trial:
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