Sales Tax Update May 2020

As Covid-19 shuts down more and more retailers and puts a hurt on sales tax revenue on all the states, they are becoming more aggressive in collections. Determinations of nexus (liability to collect sales tax) have become more difficult as states changed their laws and conditions. And to make it even more confusing, some are even going after the manufacturers requiring them to collect it.

Generally, my store (The Keeping Room) does not collect sales tax outside of Virginia. I do not meet the volume thresholds in many states to have to do so. However, in the past month I have placed two orders with manufacturers only to see them collecting sales tax and putting it on the acknowledgements on drop ships. This puts me in the uncomfortable position of having to go back to the customer and inform them there will be a correction to their invoice and sales tax will be added. They can of course, cancel their order if they prefer. I cannot absorb that sales tax percentage.

I spent several hours trying to fight this with the manufacturers, who have their own sales tax departments, and was not successful. It was either pay it or cancel your order, or provide us with your Tax Reseller Certificate for that state (I'm not doing that!), which means I would have to collect it anyways.

Obviously one does not kick the hornets next to see if there are any inside, I don't want to make inquires to see if they charge. That just gets everyone wound up and checking to see if they should.

Right now I can tell you that if you live in either Illinois or Pennsylvania, and order either Century or Maitland Smith, you will get charged sales tax. The same parent company owns Hancock and Moore, Jessica Charles, Hickory Chair, Pearson, Highland House as well, so its just a matter of time until it trickles into their accounting departments.

Any orders place with The Keeping Room may be subject to this new collection. I will let you know if it happens and you can choose to pay it or cancel your order. This is not from The Keeping Room, its at the manufacturer level so you will be paying it from any store.

That seems weird to me. Is the delivery company contracted by you, or the manufacturer? If by you, then I thought it shouldn't matter? If the manufacturer is doing the delivery / dropship and they are contracting the delivery company then yeah it can be challenging since technically the manufacturer is delivering the product to the various localities and it is not passing through a reseller. From what I understood of your posts here over the years though, you control the delivery and arrange the contracts with the various companies to pick up the products so you are the receiver and you should only need the Tax Exempt Reseller Certificate for Virginia.

I am not a tax accountant but have some knowledge of the industry. This just seems strange to me. Good luck Duane, things like this are always a pain!

What happens is the State Sales Tax Agencies put out what I call a "scare letter" to manufacturers and in order to protect themselves, they collect the sales tax from the dealer, unless the dealer can provide them with a tax resale certificate for that state it is being dropped-shipped to. Most manufacturers don't want to "push-back" against the taxing authority, but in truth the manufacturer has no nexus in that state and if it went to court they would probably win. My understanding is that it's on the selling dealer to collect the tax.

Companies with hugely deep pockets like Amazon and EBAY have fought sales tax battles and lost, but they do have nexus in all states.

My Virginia Tax Resale Certificate only covers items sold and delivered in this state.

The other thing going on is the furniture industry STILL does not want their dealers selling out of their local area, so a little store like mine can't make too much noise about it as I technically may already be in violation of their internet sales policies and MRP (Minimum Selling Retail Price). Again, its don't kick the hornets nest to see if there is anything is inside. While they LOVE the orders The Keeping Room (and other dealers drops shipping) send to them, once you get attorneys involved there are compliance issues asked on many other levels as well. Yes, that's a holdover from the last century and doesn't really fly in the internet age, but that's the way it is.

Plus, at the end of the day, the customer is supposed to pay the sales tax, either to the dealer or declare it to their home state. So it's really tilting at windmills when all is said and done.

Rock House Brands has a lot of companies, and they will all be transitioning to the same internal accounting system in the future for all their lines. That means the day is going to come when Hancock and Moore, plus Jessica Charles will have sales tax collected at the manufacturer level for all drop shops. I don't have a time-line for this, and with the whole Covid-19 thing I doubt it will happen in 2020, but it's coming according to my contacts.

All Century and Maitland Smith already have it in place, and I have heard Hickory Chair is probably next of the RHB companies. Be prepared to pay your state sales tax on orders in the future, no matter what dealer you place your order with.

I will keep making inquiries on this, but I don't think its going to much matter.

Update:

I had a Hancock and Moore invoice come through the store today for a client in Washington State and there was a Sales Tax Charge on it that required ME to pay Hancock and Moore on behalf of the client. i knew this was coming, but didn't expect it to be until 2021. But folks, it's here now and I can not absorb the tax on your behalf should you order. And this is going to be with ANY dealer, not just my store. Instead of a nice, quiet day-before-Thanksgiving work day, i was on the phone for several hours about this. My issues is that Century, the parent company, did no notification to the dealers this was coming. We dealers need to know this, so we can tell YOU when you place an order. Your State passed the law that they will not accept out-of-state-Sales Tax Resale Certificates and now collect at the manufacturer level if its drop shipped from the factory with any carrier.

These states are :

Alabama

California

Florida

Hawaii

Illinois

Louisiana

Maryland *

Massachusetts

Washington

Washington D.C. *

* These come directly to my store and we deliver with our own truck, and can bypass the local sales taxes in these states as we don't meet their definition of nexus.

So if you live in any of the states above, and order a Rock House Brand product from any dealer you are going to pay the sales tax as a pass through. There is no longer any way around it The good news though, it is taxed at the wholesale level, not retail, so net-net it will be slightly less for you. This has gone into effect, so if you have an order in house right now and it's in production, you will get tapped on your final bill. If your order is not yet in production, you can call and cancel it (at least in my store). There is no workaround however - so if you want and of the brands of this group, it's going to happen. I'm guessing other states will soon follow as they look for revenue streams.

Post here if you have any questions and i will do my best to answer them. Sorry gang, but it's your State Legislators that have done this.

Sticky removed

Is it still only the above listed states or has it gone to all states yet? Wondering about Connecticut.

No issues with CT at this time. The "difficult" states are California, Washington (state), Maryland and Illinois. But I have a work-around for all those as well.

Quote:

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Originally Posted by drcollie

Update:

I had a Hancock and Moore invoice come through the store today for a client in Washington State and there was a Sales Tax Charge on it that required ME to pay Hancock and Moore on behalf of the client. i knew this was coming, but didn't expect it to be until 2021. But folks, it's here now and I can not absorb the tax on your behalf should you order. And this is going to be with ANY dealer, not just my store. Instead of a nice, quiet day-before-Thanksgiving work day, i was on the phone for several hours about this. My issues is that Century, the parent company, did no notification to the dealers this was coming. We dealers need to know this, so we can tell YOU when you place an order. Your State passed the law that they will not accept out-of-state-Sales Tax Resale Certificates and now collect at the manufacturer level if its drop shipped from the factory with any carrier.

These states are :

Alabama

California

Florida

Hawaii

Illinois

Louisiana

Maryland *

Massachusetts

Washington

Washington D.C. *

* These come directly to my store and we deliver with our own truck, and can bypass the local sales taxes in these states as we don't meet their definition of nexus.

So if you live in any of the states above, and order a Rock House Brand product from any dealer you are going to pay the sales tax as a pass through. There is no longer any way around it The good news though, it is taxed at the wholesale level, not retail, so net-net it will be slightly less for you. This has gone into effect, so if you have an order in house right now and it's in production, you will get tapped on your final bill. If your order is not yet in production, you can call and cancel it (at least in my store). There is no workaround however - so if you want and of the brands of this group, it's going to happen. I'm guessing other states will soon follow as they look for revenue streams.

Post here if you have any questions and i will do my best to answer them. Sorry gang, but it's your State Legislators that have done this.

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Is this sales tax issue still an issue for Florida residents? I haven't seen sales tax issues in any of the posts for out of state deliveries since this was unstickered so just wondering.

Thanks

The above is correct. Rock House Brands and their subsidiaries are collecting sales tax at the manufacturer's level on direct ships to those states. If it is not a direct ship and goes first to a dealer, than they do not collect that tax. A lot depends on method of shipment and carrier used. I am not going to go in to detail here on the forum, because skirting tax laws is not a good discussion topic for public forums. Contact me directly if you have questions.

Quote:

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Originally Posted by drcollie

The above is correct. Rock House Brands and their subsidiaries are collecting sales tax at the manufacturer's level on direct ships to those states. If it is not a direct ship and goes first to a dealer, than they do not collect that tax. A lot depends on method of shipment and carrier used. I am not going to go in to detail here on the forum, because skirting tax laws is not a good discussion topic for public forums. Contact me directly if you have questions.

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A sound policy....especially on Tax Day 2022!!

Just thinking ahead to future purchases...but I understand the bolding.

Can't wait to get our chair and ottoman!!...it's supercharged our living room makeover and my learning how to fix drywall!!

Hopefully you'll be receiving our check any day now.

Cheers!!

HA! Drywall is not too hard, but can be intimidating. I made and put up all the divider walls in the upstairs of our store some 25 years ago. The quotes we were getting to have it done were ridiculous, so I did the build-out (including electrical) myself. Coincidentally I am doing some nail pop repair in my staircase corridor today - waiting on the sheetrock mud to dry for the final coat. A few drywall tips:

1) Don't rush it. Give it time to dry on joints.
2) Don't overthink it. Drywall is fast and easy.
3) Use a sander with a vac hose attachment or at least a filter dust collector. Drywall dust goes EVERYWHERE.