TTR Stay current on all things tax.

Stay current on all things tax.

Whether it's providing the latest news, sharing helpful tips, or creating video content – we want you to have the latest tax materials to keep you accurately informed.

Latest News:

Latest Announcements:

Jun 10th, 2019

TTR Releases the First-Ever Restaurant Content Library to Help the Restaurant Industry Get Tax Right

McMinnville OR, June 11th - TTR, the leading provider of accurate tax answers, laws, and rates, is releasing a new Restaurant library to help the Restaurant Industry get tax right.

"The restaurant industry will frequently ask questions like, ‘How do we tax employee meals?' or ‘Are we buying paper napkins exempt for resale?' We created the Restaurant library to answer those questions across all states, and take the guesswork out of sales and use tax in the Restaurant Industry," explained Ken Webster, Head of Research for TTR.

TTR's new Restaurant library covers restaurant sales and meals tax for nearly three hundred (300) items in every state. It includes complex topics such as: bag fees, food sales, employee meals, complimentary food, non-food items, tax-on-tax, and exempt qualifications for manufacturing.

"We went out to the Restaurant Industry and said ‘What do you need? Where are the tricky issues?' That's how we ended up with the most comprehensive set of answers for the restaurant industry, anywhere," added Ken Webster.

TTR has been helping tax professionals save time and get tax right for over a decade. TTR performs sales and use tax research for a comprehensive library of thousands of products, services, and questions applicable to all industries. These are researched in every state, given simple explanations, and made available to users via TTR's website. Everything is kept accurate and up-to-date.

To learn more about Tax Answers and other TTR products, please visit

Jun 26th, 2018

South Dakota v. Wayfair Outcome- Do I have to collect sales tax now?

McMinnville OR, June 26th - South Dakota v. Wayfair Outcome: Do I Have to Collect Sales Tax Now? Let's see if we can get you an answer or give you enough information to get an answer on your own. In order to do this, we need to cover some background information as simply as possible. There are words (terms) in this article that may be new to you - they are defined to make life easier. All that said, this is "tax stuff," so put a smile on your face and let's get to it.

Important Background Information

What is Nexus?

Sounds like something cool out of a movie, but it is not movie stuff. The word "nexus" simply means a link or connection between two or more things. When you used your computer to read this article, your fingers had nexus with your keyboard and mouse. They were connected. They had nexus with one another.

What is "Sales Tax" Nexus?

For sales tax, nexus has a slightly different meaning and is often referred to as "sales tax nexus." "Sales tax nexus" means that a company is connected to a state and because of that connection, a company:

  1. Must register to collect and pay sales tax,
  2. Must follow that state's sales and use tax rules on its sales in that state, and
  3. Must collect and remit sales tax to that state on taxable sales.

In short, it means that you have to collect tax, fill out a tax return, and send the collected tax to a state.

Collecting Sales Tax ("Filing Obligation")

When a company has "sales tax nexus," that company has what is commonly called a "filing obligation." A "filing obligation" simply means that you must file sales tax returns.

Old Rule: "Substantial Nexus" with a "Physical Presence" Requirement

What was the "Old" Rule (before South Dakota v. Wayfair)?

The old rule was: If a company has "substantial nexus" with a state, then it has sales tax nexus and a filing obligation. So what did "substantial nexus" mean under the old rule?

Under the "old" rule, "substantial nexus" meant that a company had to have a physical presence in a state, like an employee or property.

A company had a "physical presence" in a state if a company:

  1. Owned property in the state (had a store or some other physical property), or
  2. Had employees in the state.

Over the years, states added a lot more ways for a company to be physically present. For example, states provided that having agents, delivery trucks, sales representatives, computer servers, leased property, and many additional activities within the state meant that a company was physically present in the state.

LEGAL HISTORY of OLD RULE: The "physical presence" test was created in 1992 by the Supreme Court in Quill v. North Dakota. In Quill, the Supreme Court decided that a state could not require an out-of-state company to collect sales tax unless the company had "substantial nexus" with the state. In Quill, the Court explained that "substantial nexus" meant that a company had to have a physical presence in a state, like an employee or property.

"New" Rule: Substantial Nexus without a Physical Presence Requirement

What is the "New" Rule (after South Dakota v. Wayfair)?

"New" Rule: If a company has "substantial nexus" in a state, then a company has sales tax nexus and a filing obligation with that state.

Under the "new" rule a state cannot require an out-of-state company to collect sales tax unless a company has a "substantial nexus" with a state. Yes, this sounds identical to the old rule in 1992 (and it nearly is identical), but there is one very important change - "substantial nexus" no longer requires that a company be physically present in a state. The Supreme Court removed the "physical presence" requirement from the definition of "substantial nexus" as part of its decision in South Dakota v. Wayfair.

So the "new" rule is not so much a new rule as it is the old rule with the "physical presence" requirement removed. It is also important to note that the "physical presence" alone may not mean that a company has "substantial nexus."

So what is "substantial nexus" and when does a company have it?

What is Substantial Nexus Now?

The Supreme Court defined "substantial nexus" to mean that a company uses or takes advantage of the substantial privilege of carrying on business in a state.

When Does a Company Have Substantial Nexus?

A company has "substantial nexus" when it uses or takes advantage of the substantial privilege of carrying on business in a state. Here are two examples of when a company would have "substantial nexus" with a state under the new rule:

Example 1: A company that sells into a state more than $100,000 in a year would have "substantial nexus."

Example 2: A company that has 200 or more separate transactions for the delivery of goods or services into the state in a year would have "substantial nexus."

In both of the above examples, a company would have "substantial nexus" and a state could now require an out-of-state company to collect sales tax. Please note that the above examples are examples and not meant to be the only examples of when a company has "substantial nexus."

Another thing to keep in mind is something the Supreme Court mentioned in its recent Wayfair decision. The Court was careful to point out that South Dakota had three special protections for out-of-state merchants:

  1. South Dakota's economic nexus rule did not apply to businesses that transacted only limited business in South Dakota.
  2. South Dakota's economic nexus rule did not apply "retroactively" (in other words, it did not apply to transactions that took place before the state's economic nexus rule existed).
  3. South Dakota adopted the Streamlined Sales and Use Tax Agreement, a uniform model law.

What is the importance of the Court mentioning these three things? It may mean that the Court is sending a message to states asserting economic nexus that they should also have similar protections in place.

Do I have to Collect Sales Tax Now?

South Dakota

South Dakota has a law that clearly explains when a company has nexus and has to collect sales tax. In South Dakota, when a company sells more than $100,000 or has 200 or more separate transactions for the delivery of goods and services into South Dakota in a year, then a company has sales tax nexus and must collect sales tax now. The Supreme Court decided that this law is a valid way to decide when a company has to collect sales tax in a state.

Other States with South Dakota-Like Laws

Tax experts refer to South Dakota's law as an "economic nexus" law. Simply put, the focus of the law is on the economic/sales/business activity of a company and not a company's physical presence. There are several other states that have "economic nexus" laws in place. These states include Alabama, Arizona, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Mississippi, Rhode Island, Tennessee, Vermont, Washington, and Wyoming.

It is important to note that these other state laws have not been reviewed by the Supreme Court. While that does not mean they are invalid, it does mean that their laws may be close enough to the South Dakota law to be valid, or too far away.

Alabama - $250,000 or more in sales in a year.

Arizona - $100,000 or more in sales in a year.

Georgia - Effective Jan. 2019 - $250,000 or more in sales in a year or 200 or more separate transactions in a year.

Hawaii - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Indiana - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Illinois - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Kentucky - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Louisiana - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Maine - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Massachusetts - 100 or more separate transactions that generate $500,000 or more in sales in a year.

Mississippi - $250,000 or more in sales in a year.

Rhode Island - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

South Dakota - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Tennessee - $500,000 or more in sales in the prior 12 months. Note that Tennessee's nexus law still has to be approved by the legislature.

Vermont - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Washington - $10,000 or more in sales in the prior 12 months. (B&O Tax is $285,000 or more in 2018).

Wyoming - $100,000 or more in sales in a year or 200 or more separate transactions in a year.

Most of the states listed above have "economic nexus" laws very similar to South Dakota's law that the Supreme Court found was valid. Some states are different. Alabama's "economic nexus" law requires a company to collect sales tax if they make more than $250,000 in sales within a year. This would appear to be valid because it is so similar to the law in South Dakota. Washington's "economic nexus" law requires a company to collect sales tax if they make more than $10,000 in sales within a year. This dollar amount is much smaller than the one in South Dakota and might be challenged by companies.

Other States Not Mentioned Above

What about states that do not have "economic nexus" rules or laws? If you want to be conservative, then look at your economic activity across all states. If your company sells more than $100,000 or has 200 or more separate transactions for the delivery of goods and services into a state, then your company is very likely required to collect sales tax now.

If you are not sure or have questions, please contact a tax expert.

So, Do You Have to Collect Sales Tax Now?

In South Dakota, the answer is clear. If your company sells more than $100,000 or has 200 or more separate transactions for the delivery of goods and services into South Dakota in a year, then your company must collect sales tax now.

In other states with laws similar or identical to South Dakota - the answer is also clear - If your company sells more than $100,000 or has 200 or more separate transactions for the delivery of goods and services into those states in a year, then your company must collect sales tax now.

In other states without laws similar to South Dakota - follow the law (if it exists) and contact a tax expert if there is no law or you are not sure whether your business activities fall within the law.

Apr 19th, 2018

South Dakota v. Wayfair - TTR Explains What Tax Technology Options Really are Available

South Dakota v. Wayfair

Currently, the US Supreme Court is considering whether to overrule a decision it reached 25 years ago, Quill v. North Dakota. That decision provided that online retailers are not required to collect a state's sales tax unless the retailer has a "physical presence" in that state. The current case, South Dakota v. Wayfair, arose when South Dakota began requiring Wayfair and other online retailers to collect sales tax even though they did not have a physical presence in the state.

In its arguments before the Supreme Court, South Dakota is taking the position that online retailers should be required to collect sales tax because, without such a requirement, (1) physical stores (often called "traditional" or "brick-and-mortar" retailers) are put at a competitive disadvantage by having to collect sales tax, and (2) states are deprived of significant tax revenue.

The taxpayers in the case (Wayfair, Overstock.com, and Newegg), are arguing that online retailers should not be required to collect sales because (1) sales tax collection for online retailers remains complex and burdensome - a factor in the Court's earlier Quill decision, and (2) South Dakota's estimate of lost revenue is inflated.

What does collecting sales tax really look like in the US?

A challenge with sales tax collection processes and sales tax software is that you can't just go out and look at them. If we were talking about a tractor, we could sit on it, drive it around, and do things with it. Collecting sales tax is a process that involves IT, tax and accounting professionals, software, reams of paper, lots of laws, and more.

To simplify this, there is a high-level, 8-step process for collecting sales tax:

Step One: What am I selling?

Step Two: Where does the sale take place?

Step Three: Does sales tax apply to my sale?

Step Four: If what I'm selling is taxable, what is the correct sales tax rate at that location?

Step Five: If what I'm selling is taxable, how do I calculate the sales tax?

Step Six: Once I've calculated the correct sales tax, how do I present this on a customer invoice or receipt?

Step Seven: Once I've correctly charged sales tax to a customer, how do I get that tax to the correct state or local government?

Step Eight: Once I've correctly sent tax to the correct government, what records do I need to keep in case of an audit?

Collecting sales tax correctly is not impossible, but it is time-consuming. This is why so many companies turn to technology solutions for help.

What are the real tax technology options for large, medium-sized, and small retailers in the US?

What is tax technology?

  • Tax technology is the use of software to assist with correctly paying sales and use taxes.

What are the real tax technology options in the marketplace?

  • There are many tax technology options available today, but what are you really getting with these available options?

To make sense of tax technology options and smartly evaluate the best solution for your company, it is helpful to organize what the tax technology does and does not do based on the 8-step process of collecting sales tax.

Step One: What am I selling?

Tax technology does not help with this. Professionals in the company have to know or learn what they are selling before they can effectively use tax technology.

Step Two: Where does the sale take place?

Tax technology can help with this. Some companies provide lists of geographic locations. They come in many names and forms. For example, "geocodes" typically represent a combination of state, county, and city locations. Tax technology will often use a street address input by the customer for an online sale, and then the tax technology will match that street address to a "geocode"" contained in their own system. While this process is pretty accurate, nearly all tax technology providers are only accurate to "ZIP+4" - which is a ZIP code with 4 extra numbers that represent a "block" or "group" of street addresses. This is not as accurate as connecting a sales tax rate to each address, but very few providers actually do this.

TTR, a sales tax research company based in Oregon, is one of the only providers of address-level sales tax rates in the US. Their sales tax rates connect directly to each street address, not ZIP+4. See Step Four below for an example of why this is important.

Step Three: Does sales tax apply to my sale?

Tax technology companies provide a two-part answer to this question. First, you have to go into their software and find a match to something you are selling. This is called "mapping," or connecting something you sell to an item in their "off the shelf" or "canned" list of about 2,000 or 3,000 "things." Second, you have to set this up in their software. This is usually called "configuration," or setting up the tax rules for your company.

TTR has just over 100,000 items available to map or connect to - making TTR's list of items the most comprehensive list available in the US. TTR also has proprietary artificial intelligence software that initially matches or maps a company's products and services directly to one of TTR's over 100,000 available items. This makes Step One more automatic and less manual.

Step Four: If what I'm selling is taxable, what is the correct sales tax rate at that location?

As mentioned previously (in Step Two), tax technology companies nearly all use ZIP+4 to calculate or give a customer a sales tax rate. While this is accurate in most cases, in nearly every state in the US, it results in mistakes. Take the following example in Arizona:

The area highlighted below is an actual ZIP+4 zone in Phoenix, Arizona (85043-6508).

If a business used ZIP+4 to find the sales and use tax rate, it would conclude that the tax rate for every address in the highlighted area, including the two addresses marked below, is 8.6%. However, that would be incorrect.

The address on the right (6632 West Broadway Road) is outside the city limits and has a lower sales tax rate. TTR's Rooftop Rates does not use ZIP+4, so it does not make this mistake. Instead, it relies on proprietary custom-drawn maps. With TTR's Rooftops Rates, the sales tax rate would appear as follows:

Step Five: If what I'm selling is taxable, how do I calculate sales tax?

Tax technology providers do this very well. Tax calculation software works uniformly well when it receives a correct location, tax answer, and tax rate. Companies like Vertex, Sovos, and TTR are some of the solution providers in this area.

Step Six: Once I've calculated the correct sales tax, how do I present this on a customer invoice or receipt?

Billing presentation rules or laws vary from industry to industry and state to state. For most online retailers, simply presenting a line on the invoice labelled "sales tax" is correct and sufficient for "truth in billing" rules or laws.

Step Seven: Once I've correctly charged sales tax to a customer, how do I get that tax to the correct state or local government?

Tax technology solutions often have reporting capabilities - meaning the software allows you to export information out of the system to prepare and file tax returns to the government. Each solution has different reporting capabilities. Many also offer software to assist companies in preparing and filing tax returns.

Step Eight: Once I've correctly sent tax to the correct government, what records do I need to keep in case of an audit?

Most states require that records be kept 3 to 5 years, depending on the state.

Conclusion

The above overview is far from complete, but hopefully provides a bit of simplicity and understanding to a complex area. There are other issues to address, such as who is selling and buying and whether they are exempt because of their type of business, isolated or occasional sale rules, and many other factors that can impact whether something should include sales tax.

Whether you are for or against requiring online retailers to collect sales tax, one thing we can probably all agree on is that collecting sales tax correctly, even with tax technology, is challenging for companies of all sizes. So the next time you meet a sales tax professional, give them a hug. They deserve it.

Who is TTR and what do they do?

TTR is The Tax Answer Company™. TTR has over 10,000 companies using their revolutionary online tax research platform. TTR's team of 100 professionals reads tax laws and determines whether sales tax should be applied to over 100,000 products and services that can be sold in the US. TTR also provides address-level accurate sales and use tax rates (often called Rooftop Rates). TTR also provides an artificial intelligence (A.I.) enabled Exemption Certificate Management System (ECMS) that can tell your company whether the certificates it sends and receives are valid. TTR also provides the only A.I. enabled "mapping" software in the US. TTR also provides tax automation software to automatically apply sales or use tax to transactions for your company. TTR's vision is to improve the quality of people's lives. Contact them today to find out how they can do just that for your company.

If you'd like to find out more about TTR, please email

Jul 27th, 2017

TTR Announces Release of Exemption Certificate Management System (ECMS)

McMinnville OR, July 25th - TTR, the tax answer company, announced the release of a groundbreaking and time-saving product for tax professionals. With TTR's new Exemption Certificate Management System (ECMS), subscribers can quickly upload, store, edit, verify, manage, request, export, and save exemption certificates all in one place.

Tax professionals will have the ability to quickly locate certificates by vendor name, state, or other search criteria and then easily export all selected certificates.

"One of the requests we've received over and over from tax professionals is an easy way to manage exemption certificates for all states. We asked our existing subscribers what the ideal exemption certificate management system would look like and used the feedback to create the best ECMS available." - Alex Bowling, Chief Technology Officer

TTR's ECMS notifies subscribers when certificates are going to expire and provides easy point-and-click access to send or request updated certificates. Other things you can do in ECMS include:

  • Organize customer exemption certificates separately from your company-issued exemption certificates.
  • E-sign exemption certificates - fully digital.
  • Send requests for new certificates with a single click.
  • Pre-fill required information when renewing existing certificates ( a huge time-saver).
  • Upload new certificates with ease.
  • View or download any or all certificates.
  • Request a new certificate from a vendor.
  • Full legal support for all exemption certificates.
  • Over 3X the number of available exemption certificates versus other providers.

The ECMS launches July 31st. Go to

Featured Videos:

Why Use TTR? Take a look at a recent study...

Why use TTR? Take a look at a recent study done to find a tax answer, using Google, the other guys, and TTR. We think you'll be surprised at the results!

Tax Research Suite.

Tax Answers Product Crest

taxAnswers

Every item that can be bought or sold has a tax answer, and we have them all – without all the complicated legal jargon.

Learn More

Tax Laws Product Crest

taxLaws

Get access to hundreds of thousands of Statutes, Regulations, Cases & Agency Guidance across the United States.

Learn More

Right Rates Product Crest

rightRates

The only tax rate tool that gives you a rate right down to an exact street address. With full legal support.

Learn More