Reverb Sales Tax Information
When it comes to the changes in the sales tax laws, we're here to help. Take a gander below for some useful information on how Reverb is adapting to this changing environment.
1. How did the South Dakota v. Wayfair decision change the sales tax laws?
Prior to the Wayfair decision, it was unconstitutional for states to charge sales tax against individuals or companies who didn’t have a physical presence or location in the state. In Wayfair, the Supreme Court replaced the “physical presence” requirement with an “economic presence” requirement. In other words, if you transact a certain volume of business in a state, whether physically or through the internet, the state can now require that businesses or individuals collect and remit sales tax.
2. What constitutes an “economic presence” in a state?
Currently there are two ways you can have an “economic presence” in a state: (a) by selling through a digital marketplace like Reverb, eBay, Etsy, Amazon, etc. (“Marketplace States”); or (b) by selling enough in the state so that you meet the state’s designated economic thresholds (“Economic Presence States”).
3. What do I need to do in Marketplace States?
In Marketplace States, Reverb will collect and remit the sales tax on your behalf. You will not be able to set your own sales tax policy for these states. Reverb will override any existing sales tax policies in these states. There is no way to avoid collecting sales tax in these states so Reverb will handle it all for you!
4. What do I need to do in Economic Presence States?
In Economic Presence States, the individual seller should track their sales and transactions to determine if they are going to meet the required thresholds.
5. Who is responsible for collecting and remitting in Economic Presence States?
In Economic Presence States, the individual seller is responsible for collecting and remitting sales taxes but only if they meet the required thresholds for the particular state. For more information on how tax is collected and remitted for PayPal only sellers, head here.
6. How do I know if I am going to meet the thresholds in Economic Presence States?
The reality is very few Reverb users will meet the required thresholds in Economic Presence States. First, ask yourself if you think you have sold over $100,000 or engaged in over 100 transactions in any individual state. If not, then it’s highly unlikely you will be subject to sales tax in those states. That said, for some of our larger users, it is possible to download sales reports off of Reverb to determine whether or not you are going to meet the thresholds.
7. Which states are Economic Presence States and which are Marketplace States?
Our tax partner, Avalara, keeps a running tab on legislation in the individual states and has that information as well as calculation tools that you can use here.
8. What if I'm tax exempt as a reseller or a 501(c)(3) organization?
If you have a reseller certificate or have 501(c)(3) classification from the IRS and are, therefore, tax exempt, please send us an email to [email protected] with your certificate or letter attached. We will review and process your information as quickly as possible to ensure tax exemption. Note, Reverb will only be able to provide tax exemption in Marketplace States where it directly collects and remits the tax. You will have to discuss your tax exempt status directly with the seller in sales in Economic Presence States.