- In 2018, the United States Supreme Court fundamentally changed the rules for collection of sales tax by Internet-based retailers in its decision in South Dakota v. Wayfair Inc., in which the Court effectively stated that individual states can require online retailers to collect and remit state sales tax on their sales. As an online retailer with a multistate footprint, 4over has “established nexus” in numerous states because its sales have exceeded established economic thresholds set by each state.
Product or Service Offering Taxability
- Not all products and services offered by 4over are taxed the same in each state. This is because various products and services offered are characterized separately for tax purposes, such as sales of printed materials, shipping and delivery, mailing services, direct mailing services, and so forth. Additionally, each state often ascribes its own definition of each service, as well as potentially different tax characterizations. Therefore, not all products and services offered by 4over are taxed the same in each state.
As of the 2018 U.S. Supreme Court Wayfair decision (see FAQ #1.a.), 4over has met the requirements in numerous states and by law must collect and remit sales tax. If a purchaser who is exempt from sales tax does not provide proof of exemption, such as an exemption certificate or valid resale certificate, 4over is still under obligation to collect and remit sales tax on the sale of its products or services subject to sales tax in such states.
4over may need to charge sales tax differently to be compliant with various state laws. There are 2 ways that states calculate tax:
- Most states utilize what is referred to as destination-based sourcing of the sales (i.e., the sale is deemed to be taxable at the location where the sale is considered completed under state law). This generally means that taxes are owed where the purchased product is delivered or where the purchaser takes possession or title.
- Some states utilize origin-based sourcing (i.e., the sale is deemed to be taxable at the location where the sale originates as defined under state law). This generally means the sale is considered subject to tax where the order was placed.
Unless you provide a valid exemption certificate such as a resale certificate, 4over is under a legal obligation to charge sales tax to all customers who purchase tangible personal property (i.e., physical goods) or services subject to a state’s sales tax.
Pursuant to the laws of most states, 4over must retain proof of exemption prior to a sale before 4over can be relieved of the responsibility to collect and remit sales tax on an otherwise taxable transaction. When requested, 4over must be able to provide these certificates to state taxing authorities as proof for why said sales tax was not collected and remitted.
The following are common exemption claims. Refer to each state’s regulations and instructions for your type of organization and exemption claim.
- If your business intends to resell any products or services sold to it by 4over, your business must supply 4over with a valid resale certificate issued to it by the taxing state. The forms for such certificates may generally be found on the taxing state’s department of revenue website, or, if applicable, the Streamlined Sales and Use Tax Agreement (SSUTA) website or the Multistate Tax Compact (MTC) website.
- If your business is considered a non-profit or exempt organization (e.g., churches, schools, government entities) under state law, your business must supply 4over with a valid exemption certificate. The forms for such certificates may generally be found on the taxing state’s department of revenue website, or, if applicable, the Streamlined Sales and Use Tax Agreement (SSUTA) website or the Multistate Tax Compact (MTC) website.
- If your business is tax-exempt under federal law (e.g., federal government entity, IRC § 501(c)(3), etc.), it can be certified by the IRS as a tax-exempt organization. Please provide applicable federal exemption documentation.
Generally, no. Each state has its own rules as they relate to valid exemption certificates. Some states require the certificate to be issued by that state, while others may accept certificates issued by other states. Though some states may share certain forms or accept registration in other states, it is the responsibility of the purchaser claiming exemption to supply 4over with a valid exemption certificate such as a resale certificate or permit.
- This may occur when the ship-to address is different from the bill-to address.
- This is because each state has different laws and regulations concerning the sourcing of any particular sale or transaction. If 4over has a collection obligation in any state where the transaction is deemed to be completed, 4over is obligated to collect and remit sales tax to that state.
There may be various reasons for this, such as multiple ship-to locations, or the taxability of certain products or services may differ state by state. If you were charged sales tax, it is likely the products or services are subject to sales tax, and 4over did not receive a valid exemption certificate or valid resale certificate for the shipment to that state.
This normally occurs because 4over does not have a valid resale certificate on record for the transaction. Pursuant to the obligations imposed on it under various state laws, 4over must maintain records indicating a transaction was exempt from sales tax through a valid resale certificate, which 4over must present to state taxing authorities upon their request. Without the presentation of an exemption certificate, sales that would otherwise qualify for an exemption will be deemed taxable.
Yes, proof of exemption is still required for exempt organizations under state or federal law.
Where a reseller purchases taxable products or services from 4over, its collection and remittance obligations are to the state where the transaction is considered completed. As for 4over, typically where it delivers such products or services, any subsequent sale of the same products does not change 4over’s initial obligations to the state where the transaction is deemed complete to it under state law.
Yes, 4over bears the initial responsibility to collect and remit state sales tax on taxable transactions and is obligated to charge the same to its customers under applicable state law. If your business is an exempt organization or reseller, it must supply a valid exemption certificate acceptable by the taxing state to which the transaction is sourced.
Sales tax will generally be charged based on the delivery destination for any taxable goods and services. This means if purchase orders are split between various jurisdictions, 4over will charge sales tax based on each jurisdiction’s rules. States will generally regard separate delivery locations as separate orders. As a result, 4over requires valid exemption certificates or valid resale certificates for each state to which it delivers taxable goods or services if it does not charge sales tax on a particular transaction. Therefore, if your business makes an order and indicates the order is to be delivered to both State A and State B, but only a valid State A certificate is provided, 4over will still charge State B sales tax if applicable.