How Sales and Use Tax Creates Growth Opportunities for Accountants

Marshal Kushniruk: This started with the Quill Corp. v. North Dakota ruling from the Supreme Court that said a merchant had to have a physical presence in the state as a requirement to collect tax. Then, about 14 years ago, there was a brand-new initiative called streamlined sales tax (SST), where 13 states attempted to standardize how goods and services were taxed across state borders. Now we see states trying to pass laws to gain tax collection jurisdictions every few months.

 

DD: How has sales tax changed in today’s online world?

MK: As the internet changed the way people buy, that ruling has become archaic. A lot of states are losing vast amounts of revenues they think they should be entitled to have. Over the last 14 years, there have been various moves by states to try and get more revenue. For example, states started off by attacking really big targets, such as Amazon, eBay and Overstock.com, that were selling across all the states, but not collecting tax. The states just kept the pressure on, and now more of these companies have essentially conceded that they’re just going to collect tax everywhere. It’s forced businesses to think differently about how they need to collect tax.

Now, there are a few different cases making their way to the Supreme Court. The first one is currently expected to hit in the next few months and there’s a chance that the result could change the Quill ruling. It will mean that any merchant above a certain threshold in annual sales will have to collect tax in every state it sells to. There will no longer be a physical presence requirement. If, in this particular case, the Supreme Court doesn’t change the ruling, there’s five or six other states that have cases already going through the process that will make it to the Supreme Court at some point.

For me, it’s not a question of if; it’s a question of when the tax laws are going to change and when we’re going to become more like the rest of the world. However, it’s a fact that most states get the majority of their revenue from sales tax and they’re trying to figure out how to balance their budgets.

 

DD: What about use tax?

MK: Most states have a field on their state income tax return where you enter how much you bought online, and how much use tax you should be paying is calculated. Yet, most people do not fill that out.

In Massachusetts, Amazon now has to hand over information on its sellers to the state … and . it’s not just Massachusetts that is doing this. Colorado has it and it’s also happening in Europe. So, it’s a question of time before all the states start to do this and actually have that information. When all is said and done, your state may be sending you a notice saying, “This is how much we think you bought.”

 

DD: What role has technology played in this?

MK: The digital world is making all of this easier to happen and there are many ways in which the states are starting to exchange this information. Some states are starting to figure out that they can collect your daily tax from the credit card processing companies. So, as a credit card company is settling your credit card transactions for the previous day, it wants the tax money to go directly to the state on a day-by-day basis.

 

DD: How will these legislative trends impact the way accountants work with their clients?

MK: From my perspective, it looks super interesting and lucrative for the profession because accountants are going to be released from all of the tedious, repetitive and time-consuming tasks. Things such as machine learning, artificial intelligence, Blockchain and the ability to automate tax are going to give them all of the tools to go and really apply value to the type of clients they want to work with.

Most accountants I talk to love this automation and don’t really want to be doing these mundane, archaic tax activities. They would much rather be working, and becoming business partners, with the clients. It frees up their time.

In addition, they can charge their clients for giving them advice on how to structure their operations, where and how to growth, and many other parts of their businesses. They’ll become business partners versus bookkeepers.

 

DD: What does the future of accounting look like for up-and-coming professionals?

MK: I think it’s going to allow them to really pick a niche where they want to practice. The accounting profession has, at least in my business lifetime, gone from really big firms to smaller boutique firms, and back to bigger firms again. As compliance requirements change, you had to be a certain size to have enough people in the background to make sure you’re doing everything right. I think technology now allows an accountant of any size to go and specialize, if they choose to. Staying ahead of technology is going to allow them to go and define where they want to go with their practice.

 

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Danetha Doe is known as the money mentor for ambitious women. She was named a “next-generation” accountant by QuickBooks, a “business influencer” by Xero, and a top 40 Under 40 accounting professional by CPA Practice Advisor.

Marshal Kushniruk manages Avalara’s key strategic ERP accounts and independent software vendors, supporting their software and usability needs and ensuring that the highest-quality customer care and technical support systems are in place. His extensive industry experience includes creating and maintaining partnerships with hundreds of development, software solution, and value-added reselling partners worldwide.

Before joining Avalara, Marshal was responsible for sales and marketing at Sulcs & Associates and has held leadership positions at Great Plains Software, Abacus Accounting Systems, Inc., and Group 21 Consulting, Inc., where he served as president. Marshal was named one of the 100 most influential people in accounting by Accounting Today magazine in 2008.