Retail and Taxation: What to expect in 2019
Here are three retail-related tax predictions from Greg Chapman, senior VP at tax compliance firm Avalara:
• In 2019, we’ll continue to see marketplaces and traditional retailers converge. It’s happening both ways, where marketplaces like Amazon are moving to forms of traditional retail, and traditional retailers like Albertsons are making the move to marketplaces to stay relevant in the digital economy. This creates complexity for businesses and governments alike – especially when it comes to how marketplaces are taxed. By 2020, every U.S. state will have a law forcing marketplaces to collect sales tax in that state – whether they have a physical presence or sell remotely.
• 2019 will see consumers as the driving force behind where businesses need to collect and remit taxes. We’ve moved beyond where it was the retailer’s choice based on where they had property and people. Now with the South Dakota v. Wayfair case, where the Supreme Court ruled that states would be allowed to collect internet sales tax, that control is in the hands of the consumers. In 2019, every retailer needs to know what is and isn’t taxable everywhere because consumers are determining where a retailer needs to collect. Because retailers don’t know where their next customer is coming from, they need to be prepared.
• By 2025, real-time tax approval and remittance will be a global topic of conversation. Countries like Brazil, Italy and Poland are already implementing real-time compliance and accounting. However, the United States has always been steps behind when it comes to digital taxation. My view is that while this will definitely be a topic of discussion, the US government will not approve real-time taxation at the time of sale. The reason is this would be a massive technology issue that our current infrastructure cannot support and that the government is not willing to invest in.
• In 2019, we’ll continue to see marketplaces and traditional retailers converge. It’s happening both ways, where marketplaces like Amazon are moving to forms of traditional retail, and traditional retailers like Albertsons are making the move to marketplaces to stay relevant in the digital economy. This creates complexity for businesses and governments alike – especially when it comes to how marketplaces are taxed. By 2020, every U.S. state will have a law forcing marketplaces to collect sales tax in that state – whether they have a physical presence or sell remotely.
• 2019 will see consumers as the driving force behind where businesses need to collect and remit taxes. We’ve moved beyond where it was the retailer’s choice based on where they had property and people. Now with the South Dakota v. Wayfair case, where the Supreme Court ruled that states would be allowed to collect internet sales tax, that control is in the hands of the consumers. In 2019, every retailer needs to know what is and isn’t taxable everywhere because consumers are determining where a retailer needs to collect. Because retailers don’t know where their next customer is coming from, they need to be prepared.
• By 2025, real-time tax approval and remittance will be a global topic of conversation. Countries like Brazil, Italy and Poland are already implementing real-time compliance and accounting. However, the United States has always been steps behind when it comes to digital taxation. My view is that while this will definitely be a topic of discussion, the US government will not approve real-time taxation at the time of sale. The reason is this would be a massive technology issue that our current infrastructure cannot support and that the government is not willing to invest in.