It’s been more than 18 months since the Supreme Court of the United States overruled the physical presence rule in South Dakota v. Wayfair, Inc. States now have economic nexus: They can require a business with no physical presence in the state to register to collect sales tax if that business has significant sales in the state. For the most part, states eased into enforcing economic nexus; they understand it represents an enormous change for businesses and they’ve been working to educate rather than audit out-of-state sellers. Those days are gone. Marketplace facilitator and non-collecting seller use tax reporting laws enable state tax departments to identify out-of-state marketplace sellers that have had inventory in the state for years. That inventory creates a physical presence — and an obligation to collect sales tax.
States often review businesses that change hands. If prospective owners don’t verify the company they’re buying is compliant, they could receive unwelcome attention from tax authorities after the sale goes through. Numerous tax authorities in the United States and abroad use data analysis to help identify businesses with a high probability of noncompliance. According to a New York State Department of Taxation and Finance report, data mining provides a “more scientific data-driven approach to case selection” and helps discover “new patterns of non-compliance.”
States share taxpayer information with each other through various regional information-sharing agreements; a business known to have significant sales in one state could have them in another state.
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by gail cole
april 2, 2020