Several recent court cases show how tricky the legal system can be for online sellers managing sales tax obligations.
Lack of energy. The Washington Department of Revenue upheld a retail sales tax assessment on a taxpayer who failed to collect retail sales tax on sales to a renewable energy company. The taxpayer claimed to believe that that the energy company qualified for the exemption, but the statute provides that the purchaser must claim the exemption by requesting a refund for retail sales tax collected and remitted.
On appeal, Washington held that the exemption did not relieve the taxpayer of its duty to collect and remit sales tax and that the taxpayer was not entitled to a reduction of its assessment by the amount of the tax that would have been refunded to the purchaser.
Quite an arrangement. The Washington Court of Appeals held that a company that arranges and manages displays for installation and placement in multiple retail brands’ stores through subcontractors was subject to the state’s retailing business and occupation tax (the “B&O tax”) and retail sales tax as a retailer making retail sales, rather than a provider of “services and other activities."
According to the court, the company made “retail sales” by arranging and managing such “roll-out” work in Washington.
Bad trip. The Wisconsin Tax Appeals Commission has ruled that an out-of-state travel agent that used independent travel consultants in the state was doing business in Wisconsin and is responsible for the Wisconsin franchise tax.
The company argued, among other things, that it was in the business of selling SaaS that did not produce income taxable in Wisconsin. The commission concluded that none of the evidence supported the company’s position that it was in the business of selling SaaS or software of any sort and that the company was engaged in the sale of travel services to Wisconsin residents through its independent travel consultants located in Wisconsin, which constituted doing business in the state.
No simple answer. In Louisiana, a federal court has dismissed a lawsuit seeking to overturn the state’s decentralized sales tax collection system, saying it was filed in the wrong venue. The court reportedly did not address the merits of the case, and the suit may be refiled elsewhere.
Louisiana does not have a single statewide sales tax collector; local taxing authorities mostly oversee their own collections. Critics say the system is overly complex, particularly for small businesses – and the state was recently sued by an Arizona bead maker that sells online.
As the recent GAO report showed, the government is seeing how ‘taxing’ managing sales tax can be for businesses, and these court cases prove small businesses are getting caught in the struggle. If you are getting lost trying to navigate the complexities of sales tax for your business, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.