What is the issue?

The U.S. Supreme Court’s 2018 Wayfair decision changed what had been a relatively straightforward set of rules governing interstate sales tax established by the U.S. Supreme Court’s 1992 Quill decision. Under Quill, the requirement as to whether an organization was subject to a particular state’s sales tax collection requirement was determined by physical presence, e.g., a store, office, or salespeople in a state.

Under Wayfair, the old rule of physical nexus has been overturned and replaced by economic nexus. Each state now has the authority to decide what constitutes economic nexus. In some states, economic nexus can be triggered by something as seemingly insignificant as mailing 100 pieces of mail into the state. Under this example, an organization would be required to collect that state’s sales tax. Forty-five states and the District of Columbia require sales tax collection. For a national mailer, it is a long list of states with which to comply.

What is taxable, and what is not?

The level of complexity is significant. For example, 26 states offer nonprofit organizations a sales tax exemption. However, the rules regarding how a nonprofit can claim a tax exemption vary from state to state, and the relative ease of gaining a tax exemption certificate varies. Postage can be subject to sales tax, particularly if it is bundled with other costs. While data processing is not a tangible item, a number of states tax it nonetheless.

To help with obtaining a tax exemption certificate, TNPA has identified vendors offering discounted rates for their services open to TNPA members. To be connected, contact Bob Tigner at rtigner@tnpa.org or Mark Micali at mmicali@tnpa.org.