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The Wayfair Decision

What are the ramifications of the Wayfair decision?

The U.S. Supreme Court’s 2018 Wayfair decision changed everything from 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.

Fast forward to the new rules established by the Wayfair decision. 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 a state. For example, economic nexus can be triggered in some states by as little as mailing 100 pieces of mail into the state. Under this example, an organization would be required to collect that state’s sales tax, which is a very low bar. Also, 45 of the 50 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 has TNPA done to help its members comply with Wayfair?

No one expected the U.S. Supreme Court’s Wayfair decision to be such a big topic of interest and discussion as we started 2024. TNPA was genuinely surprised to receive email after email from both agencies and nonprofits looking for clarification and guidance. To say the rules for complying with Wayfair are complicated is an understatement. They are confusing and challenging, and suppliers and partners can find themselves in the position of tax collectors. Given this complexity and the need for our members to stay a step ahead of challenging and difficult tax problems, on February 8, TNPA put together a Virtual Town Hall Meeting to provide some needed guidance. Over 220 participants attended the Town Hall.

To provide needed expertise for the Town Hall, TNPA had two attorneys from one of the country’s premier sales tax law firms, Brann & Isaacson. The two attorneys (Mr.) Marty Eisenstein and (Ms.) Jamie Szal are two highly credentialed tax experts from the firm.

The question of what is taxable and what is not?

Once again, the level of complexity is significant. Twenty-six states offer tax exemption from sales tax to nonprofit organizations (NPOs). However, there is no uniformity in terms of the rules as to how an NPO can claim a tax exemption. It varies from state to state. The relative ease of gaining a tax exemption certificate varies from state to state. It is relatively straightforward in some states, and in others, it is not.

To help navigate obtaining a tax exemption certificate, TNPA has identified vendors offering discounted rates for their services open to TNPA members. Contact Bob Tigner at rtigner@tnpa.org or Mark Micali at mmicali@tnpa.org, and you can be connected to one of the vendors.

Adding to the complexity is the tax treatment of such items as data processing. And while data processing is not a traditional, tangible item as is a letter, nonetheless a number of states tax this service.

Postage — and this may surprise people — can be subject to sales tax, particularly if it is not specifically itemized as an individual cost. In other words, if postage is “bundled” together with other costs, it likely will be subject to sales tax.

Resources

These resources will help nonprofits and partner agencies and suppliers navigate the state-by-state sales tax requirements and pursue available exemptions and savings.

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