The mess around US out-of-state sales tax; aka WARNING: Avoid Avalara if you are on Shopify Basic

EgalitarianCo
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WARNING: Avalara sells fear and snake oil. I know because we bought their package for $10k/year. FEAR: The fear is that Avalara tells you all about how you are liable. Someone in your company gets scared, and then they tell everyone that this new thing with a very high compliance burden is required. SNAKE OIL: The snake oil is that they will indemnify you. But basically no small merchant is getting hit by out-of-state tax audits.   

 

Here's what they don't tell you:  

“Nobody is talking about enforcement mechanisms, or even thinking about that,” said Verenda Smith, deputy director with the Federation of Tax Administrators. “Everybody is still in the stage of having elected officials work out what they want as a tax policy, generally getting their laws and guidance in place.” 6/19/2019.

 

Reality: States aren't coming for the little merchants. It's a violation of the constitutional requirement that states not interfere with inter-state commerce. 

 

So if you are a small merchant, stay the heck away. The Supreme Court is clear that states can't impose undue burdens on out of state merchants. Wayfair vs South Dakota involved a $6.779 billion/year revenue company who can easily implement sales tax collection (like Amazon etc) in all states. We are the opposite. Us tiny merchants end up with a huge burden. 

 

Of course Shopify Plus, built for $1 million- $50 million merchants, has the integrations to make this situation less painful. (and we all know that implementing sales tax collection is going to be more painful the smaller the merchant...). Those integrations ARE NOT EVEN OFFERED FOR SHOPIFY BASIC. Avalara advocates that any merchant selling $100k a year in a specific out-of-state has an economic nexus there and should be collecting sales tax. There's the gap - you sell $750k/year and you are supposed to do this WITHOUT Shopify's integrations. 

 

To reiterate - it's clear that if you sell more than 100k/year in another state (or a variety of other tests), you are told by the state sales tax agencies to collect sales tax there. But the Supreme Court has also told them not to impose a burden. They need to make it easier for small merchants. Eventually Shopify + Taxjar, Avalara etc will have the right plans and integrations.

 

Right now though, just the compliance software which only helps with a portion of these requirements, costs 1% or more of your revenue (!!!!!), and that's before full implementation and/or time costs. So small, Shopify basic merchants are strongly encouraged by Avalara to pay the big bucks and then DON'T GET THE INTEGRATIONS TO MAKE THEIR LIVES EASIER.

 

That's some BS. 

 

Shopify needs to release the integration for everyone, or just take on all sales tax collection responsibilities.