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Sales tax nexus study

Sales tax Question:

Read the Scenario

You have just been hired as the Tax Director for an online retailer that sells athletic shoes. Customers place orders on the company’s web site, and shipments are made from a warehouse in Kansas via common carrier. All employees are based in KS, although salespeople periodically travel throughout the U.S. to distribute promotional materials.

You discover the company has never charged its customers sales tax, and given the recent landmark Wayfair ruling, you believe a thorough sales tax nexus study is warranted. You’ve scheduled a meeting with the department VPs (Controller, HR, Legal, Sales, Facilities, Tech Ops) to gather the intel you need to properly scope the company’s sales tax filing obligations.

Initial Post: answer at least two of the following questions.

What type of information would you request and from which department lead(s) to analyze where the company had PHYSICAL PRESENCE sales tax nexus?

How would you answer #1 for an analysis of ECONOMIC sales tax nexus?

How would you answer #1 for an analysis of VIRTUAL sales tax nexus?

Name 2 or 3 types of operational/management decisions that you need to be proactively informed of by one or more of the department leads to ensure the company remains sales & use tax compliant in the future.

The CFO applauds your diligent spirit but doesn’t want to redirect the company’s time and money towards a non-value-added project, so he would like you to address the following question: “If sales tax would effectively come out of our customers’ pocketbooks (i.e. we’re just an administrative middle-man), would there even be an economic downside for the company if we choose to adopt a “wait and see” approach – i.e. wait to register for and charge sales taxes until we see if the state tells us to do so upon audit?”

The Controller is also skeptical about the cost-benefit analysis for this project, and asks you to help her understand the following: “If a state would have assessed $2 sales tax and $13 use tax using the Quill physical presence nexus standard, and now the assessment would be $12 sales tax and $3 use tax using the Wayfair economic nexus standard, won’t the state get paid $15 either way?

Why should we spend so much time and effort when we’re just slicing the same pie differently?”

Last Updated on February 11, 2019

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