Wayfair Changed Nothing
At least it shouldn’t have… for buyers
Everything written here is based on one premise: The Wayfair decision did not change taxation.
I know, it sounds crazy. Hear me out.
The 2018 US Supreme Court case about economic nexus, a conversation that elevates the blood pressure of tax professionals across the country (and around the world), did not change the tax liability for a single person or entity. There is not a single case where anyone owed tax after Wayfair that they didn’t owe before as a result of that ruling. What Wayfair changed was process. Wayfair changed HOW you pay your liability, not IF you have one.
The process changes that Wayfair created are about trust and responsibility. OK, it’s about a lack of those things. States (correctly) surmised that they were losing revenue for uncollected tax liabilities generated by online sales, and South Dakota sued to place the responsibility of collecting that lost revenue on the companies delivering goods and services within their borders, even if the company itself never set foot in the state. As a result, the compliance requirements on sellers increased exponentially. Registrations, tax determination requirements for global customers, and the compliance filings for countless jurisdictions are enough to make anyone’s head spin. But through it all, one thing never changed: who owes tax for each transaction. Remembering that each transaction has its own attributes, parties, and tax cost, helps to avoid the chaos that accompanies conversations involving Wayfair.
The initial premise stated above applies here as well: The Wayfair decision did not change exemptions.
As the number of transactions subject to tax withholding expanded, so has the buyer utilization of exemption certificates. Taxability differences between states have been automated by tax determination software, but the inconsistency of exemptions has forced sellers to understand and apply exemption rules in potentially dozens of states. Since the passing of Wayfair, cert complexity has exploded while there have been few options to assist sellers to manage their compliance and risk needs. The few options that are available are expensive and provide only limited assurance against the risks associated with an audit.
But those issues are the sellers to deal with.
The processes for claiming an exemption have not changed. Buyers should provide the same documentation for all purchases, regardless of if those transactions are online or in person. It’s critical that the confusion and complexity of Wayfair for sellers not be projected onto buyers, or companies risk losing sales and aggravating customers who know better.
What needs to change for buyers is the way in which they engage with sellers around exemptions. Hand-written forms and document management systems interrupt digital commerce. Tax departments need to support sales professionals and customer service reps by focusing on the buyer and providing them a better way to claim their entitlements, optimizing the user experience.
In subsequent posts, we’ll address process changes that deliver an improved experience to buyers, while simultaneously managing the compliance and reporting needs of sellers.