Post-Wayfair, Nonprofits Must Monitor State Sales Tax Thresholds

By Magdalena M. Czerniawski  |  August 23, 2019

Marks Paneth has been tracking the widening impact of Wayfair, which set a new standard for determining when states can impose a sales tax collection responsibility on out-of-state sellers of taxable goods and services, since the Supreme Court decision last year. Retailers, wholesalers, service providers and other businesses have all begun to prepare for the effect that the ruling will have on how they collect sales tax. However, it may surprise some nonprofit organizations to hear that Wayfair could affect them too. Here’s one important example of how.

Internet Sales of Merchandise

Selling merchandise online is an activity that generally does meet the exempt mission standard, however, the purchasers of the goods are rarely nonprofits themselves. Therefore, nonprofits are required to collect and remit sales tax to each state they sell into. The challenge for nonprofits is that every state has different rules, and the organizations are responsible for monitoring their own sales in each state. Nonprofit organizations should be aware that since the Wayfair ruling, many states across the country have enacted their own economic nexus rules. In many cases, those are based on sales or revenue thresholds such as “$100,000 in gross sales or 200 items sold.” Once the organization meets the threshold, it automatically triggers the collection of the state’s sales tax. The good news is that these changes are not retroactive, so organizations do not have to worry about complying for past sales, but moving forward, once an organization meets state’s threshold criteria, it must register and start collecting and remitting sales tax to the state.

In light of this, we are encouraging nonprofit organizations to analyze their various sales by state, review the rules of those states that have adopted economic nexus thresholds, and understand where the thresholds are met.

For more information about sales tax registration and compliance, contact a member of our Nonprofit, Government & Healthcare Group. For more information on how Wayfair affects nonprofits, I encourage you to read my full-length article, “What does the Landmark Wayfair Ruling mean for Nonprofits?” from the Q2 issue of Marks Paneth’s Nonprofit & Government Times.

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About Magdalena M. Czerniawski

Magdalena M. Czerniawski, CPA, MBA, is a Partner at Marks Paneth LLP and a member of the firm’s Nonprofit, Government & Healthcare Group. With over 15 years of nonprofit industry experience, she provides tax services to a wide array of nonprofits, including charitable organizations, schools, social welfare organizations, professional associations and private foundations. In addition to providing tax planning and advisory services, Ms. Czerniawski specializes in matters related to ASC 740-10 (FIN 48), the reporting... READ MORE +


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