Technology has radically changed the way consumers buy goods and services.  And while we can easily identify how digital disrupters, like Amazon, Netflix and Facebook have changed our purchasing behavior, a lessor known change is the way they’ve impacted sales tax.  In fact, it’s spurred the largest development in sales tax in over 50 years with the Wayfair case. While the physical presence tests still apply, the Wayfair case dramatically expands the number of businesses subject to sales and use tax obligations.

Businesses that sell into various states now have to contend with the sales & use tax regulations and requirements of thousands of jurisdictions nationwide. One big question for these businesses is how much time, effort, and money they need to devote to compliance – and do they need to pay attention to it at all?

Technology companies frequently engage in sales tax nexus creating activities without realizing it.  Many different activities can create “nexus”, the link that establishes the need for a seller to adhere to the jurisdiction’s sales tax rules.  And with the introduction of economic nexus in 2018, it has become even more confusing.

Many jurisdictions are looking to raise sales tax rates.  Perhaps in response to lost collections due to internet purchases.

When I first started in public accounting in 1985, there were two computers in the entire office. I worked for one of the Big 8 at the time, so this wasn’t because the firm was behind the times. This was the extent of computer technology in most accounting firms in 1985.

Colorado has the lowest state sales tax rate in the country at 2.9% (except for the 5 states that don’t impose any sales tax). But don’t get too excited since there are a number of local jurisdictions within Colorado that impose sales taxes – taking the average total sales tax rate to about 7.5%.

Many of us use zip codes to determine the sales and use tax rates to apply to an invoice for tax calculation purposes.  However because some local jurisdictions can cross zip code boundaries, using just the 5 digit zip code may not be the most accurate method for sales tax rate determination purposes.