Baseline Nutritionals is now required to collect, report, and pay sales tax for various states (with the numbers growing rapidly) even though we do not have physical presence or connection (i.e., Nexus) in those States. The decision to charge Sales tax is not our idea; it was imposed on us by last year’s Supreme Court “Wayfair Decision.” This decision is causing a lot of pain for businesses and for customers across the States. Before Wayfair, companies were only required to charge sales tax in States where they had physical Nexus. For Baseline Nutritionals, that meant Nevada and California. The Wayfair ruling ended the physical presence requirement for Nexus and changed the e-commerce landscape. Now, all that’s needed for a state to claim they have Nexus with a company is for sales from that company in their state to hit X number of sales or Y dollars in that state per year. And each state has the right to set their own requirements, which they are now aggressively doing. The bottom line is that Baseline Nutritionals is now required to collect sales tax in a number of states, with most of the rest likely to follow in short order.
With each State’s taxes having to be calculated individually, it costs companies an extraordinary amount of money and time to administer the collecting, reporting, and paying of taxes for all these States—in many cases far more than the actual amount of the sales tax collected for a given State. It can cost several thousand dollars to administer the collection of what amounts to just a couple of hundred dollars in tax for a smaller State. By charging sales tax, we recoup the couple of hundred dollars, but not the several thousand. Multiply that by 20, 30, or more States, and you can see how smaller companies can lose large amounts of money in the process. But, it’s now the law and we have to abide by it, as do you if you reside in one of those States.