1991 – Navigating Sales Tax Obligations in the Digital Marketplace with Peisner Johnson’s Jason Parr

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1:06With us right now is Jason Parr. Jason, you are the CEO of Peisner Johnson, aka the sales tax people. Jason, it's great to have you. By the way, your website is peisnerjohnson.com. To our friend that's listening, just click in the show notes or kind of click around in your podcast app and you'll find a direct link so you can follow along. Jason, thank you so much for joining us. Hey, Josh. It's great to be with you as well. Your friends refer to you as PAR. I may go back and forth on that, depending on our conversation. But Jason or PAR, tell us about the work that Pizer Johnson does, who you serve and what you do.

1:42Yeah, we call ourselves the sales tax people. You can also reach us at the sales tax people dot com. Sometimes people can find that Pizer Johnson is a mouthful to say. And the sales tax people really focuses on what we do. We've been around a long time. We've been around for 33 years. But our focus in the last six years has been on sales tax and the difficulty that companies have really found themselves in managing a more complex. platform, a more complex environment when it comes to dealing with sales tax. Just to give you a quick background on why, big Supreme Court case in 2018, Wayfair versus South Dakota, South Dakota won, took it to the Supreme Court.

2:28Essentially what they said is if you sell any products or services in the U.S., you have a responsibility to register and collect sales tax when you exceed certain thresholds. in multiple states across the U.S. When the Supreme Court said there's a fair law that South Dakota has on the books, all the other states that impose sales tax mirrored that law. And now it's not just about where you conduct business, it's where your customers are located. And so that has changed the landscape for a lot of companies. You may have been a company that's been going for 20 or 30 years. You've been in one or two states with employees and equipment and inventory.

3:09And now because you sell via e-commerce online, whatever the case may be, you need to deliver in multiple other states, you now might have a responsibility to register in 20, 25, 30 or all states that impose a sales tax, depending on how big that is and whether you surpass the thresholds. Yeah, yeah. So tell me, typically, you know, a company that's selling online, what is their life like, right? Is it is I don't historically I haven't I'm not selling physical products or whatever. I hasn't as a service provider. I don't know, like my accountants kind of just take care of that. But maybe can you just give us a little bit of a one on one on sales tax right now, particularly those that do majority or vast majority of their business online?

3:58100 percent. So there's three very important questions. They're really simple questions. We try to simplify individuals trying to figure out what their situation may be. As you know, if you're selling products online, it's already a fast paced world, right? There's been advances in technology and software and approach and processes and everything. So usually it's a company that's growing pretty rapidly and are utilizing advantages from online e-commerce to expand their book of business and grow. And in that process, there's three questions that all of these laws require everyone who's conducting business like this.

4:35Number one, do I have nexus? Real quick, nexus is just a fancy word in the sales tax world that a state says you have enough presence in our state that you are required to collect tax on the sales of taxable items, right? Most states from an economic basis is around$100 ,000. So if you sell more than$100 ,000 in goods into a particular state, then it's possible that you have nexus or the state would say that you need to register. Number two is what I sell taxable, right? So every state that imposes sales tax has a different sales tax law. They administer their own sales tax law. And so you need to understand if what you sell in a particular state is actually taxable.

5:18Because you might exceed the threshold and have nexus and a responsibility, but you're selling something that may or may not be taxable. So that's the second answer you have to ask yourself. And then the third question is who is selling the product? What I mean by that is when all this legislation came through in 2018 and beyond, the states were also looking at what are called marketplace facilitators. So think of Amazon, eBay, Etsy, Walmart. It's a marketplace that allows other sellers to attach on and sell goods through that marketplace. Well, the state's got savvy enough to say, well, we want to impose the tax responsibility on the marketplace facilitator because there's a greater chance we're going to get our tax revenue than the millions of sellers that might be on that marketplace.

6:06So laws passed. It required those marketplace sellers to remit the tax. So if you let's say you have exceeded a threshold in a particular state, what you sell is taxable in that state. Most tangible property is, by the way. And you sell all of it on a marketplace. Well, you may not have a sales tax responsibility to register and move forward. But if you also sell goods on your own website or through other platforms that are not considered a marketplace facilitator, you likely need to register and collect tax on those sales, even though tax is being collected on other sales that might be on a marketplace.

6:43So it can get real complicated real quick for a company. but you really need to know those three measures. Do I have nexus? Do I have any responsibility to register in a particular state where my goods are being sold into? Is what I'm selling into that state taxable? That means I have a responsibility to register. Now I also have a responsibility to collect tax on those sales. And am I the responsible party? Is it all going through a marketplace facilitator or are there other avenues and channels that I sell that might make me the responsible party to ensure it's collected and remitted to the state in a timely basis.

7:21And so that's our whole lives at the sales tax people. We focus on that. We help companies navigate that. We provide free consultations for people to call in and tell us their story, right? Because legitimately founders, CFOs, CPAs, they lose sleep over this because sales tax can be a margin killer. Oh, yeah. Let me just give you an example. You expanded in 2020. You're just killing it in 2023. Now you're in 2024. You didn't know about the sales tax issues. You weren't sure what was going on, but you should have been registered in, let's say, 20 states back in 2020 when you were blowing up. If the states determine that you should have been registered, they can go back to all of your sales from 2020 through 2024.

8:15They can require you to pay the tax out of your own pocket to the state with penalty and interest. If you're running 10 % margins and you're paying 10 % sales tax out of your own pocket with 10 to 20 % penalty and interest on those dollars, then you've killed your margins for three or four years straight. It can put a company out of business. And so we work with companies to help them navigate that, mitigate the possible historical responsibility they had, and then try to come forward and get compliant with the least amount of money out of pocket to try to save them that. It's something you just can't put your head in the sand on because the longer it goes, the worse it gets, obviously, with penalty and interest.

8:58Yeah. How often, Parr, do you see a situation where it's possible that someone may have been overpaying on state tax. And so there's maybe cause for recovery. We see that as well, right? And in this new environment, it's likely to occur more because more companies are registered. And that means more companies are collecting tax. A given type of company that's in a particular state may have exemptions that are on the book. So if you think about property that you're selling, tangible personal property is taxable everywhere unless there's an exemption on the books or on the law that indicates that it's not so if i'm a manufacturer in texas and i'm processing other tangible property for sale then i get certain exemptions allotted to me on equipment on repairs on supplies and other items i may not be aware of those or i may not be able to in practice apply those exemptions properly.

10:04And I'm buying these goods from multiple suppliers at multiple times of the year, et cetera. And so there are situations, it could be a technology company, a retailer, a manufacturer, all sorts of different reasons why different states provide exemptions on certain types of goods that aren't taxable because of the way they use them or the type of entity they are. So there could be nonprofit entities that are buying goods or supplies. And maybe because of the type of entity they are in a particular state, that state allows them to purchase goods tax-free because of the nature of their entity. So you would think, well, all schools are government.

10:45They would not be taxable. In Texas, schools are not taxed on goods that they buy, but in California, they are. And so it depends on the state and how they impose their sales tax law on the citizens and on the companies. You know, I'm speculating a little bit, but I wonder if often the clients, you know, you start talking about, you know, the potential for savings or the potential for efficiencies or just doing things right. And, you know, they're kind of looking at how your fees are structured. It might be common to realize a net positive gain from engaging with you. I don't know how often that's the case.

11:27100%. So this is something unique to our firm in particular, but we have this free consultation. It's called the What's Next Call. And so it's kind of a cheesy name, but what happens is we get to talking to a company about their situation, and the question is always, oh my goodness, what do I do next? Right? So it's a What's Next Call. we often can offer advice and direction and some guidance on next steps. One of our mantras is collaboration builds confidence. So you might have an idea of what you need to be doing as a company and you're just not sure, or you feel very sure. We still would say, Hey, let's just chat because it's not a hard sales call.

12:08Our hope is that you leave with greater peace of mind when it comes to sales tax and more confidence in the decisions that you're making forward. We're very happy whether we can help you or not, whether you engage us or not. If you leave with greater confidence and peace of mind, we're very happy that that's occurred. Most often we identify that individuals are either acting too hastily in complying, or they're just not willing to face the situation. And so that can create some hurdles for them, and it can create some greater penalties or exposure that's unnecessary. And so you always want to get a second opinion, right?

12:47If you are a medical doctor and someone tells you you've got a severe situation, you don't just say, you know, I'm just going to go with it and see what happens. You might go see somebody else and just chat. In the world of technology and platform, there's a lot of DIY approaches to dealing with sales tax and determining how you're going to get compliant. And the platforms and automation has just provided huge efficiencies in the world of sales tax, but they don't provide the human touch and the interaction and the collaboration that you get from real people, right? It's not, it's, it's, it's not, we don't call ourselves the sales tax people unintentionally.

13:30We use automation, we use technology, we use platforms that are available in the industry, but you want to talk to somebody and collaborate with them on the direction that you're taking to move forward. And it can save you lots and lots of money and even your own business. Or if you're in a position to sell your business and you're wanting to merge or be acquired, you have to make sure that sales tax is looked at and managed properly because we have seen deals die on the table when it comes to what's your sales tax situation look like? And they weren't compliant. So to answer your question more briefly, every single day we talk to companies that are not in a compliance or they're not aware of the compliance or the responsibility that they have for sales tax and help companies manage the situation and navigate it.

14:26Every single day we talk to people who are in this situation. Well, it looks as though you've got some resources as well. And so do you mind maybe just sharing a bit about that? Again, your website, we've got linked up in the podcast right now, peisnerjohnson.com, or you go to thesalestaxpeople.com, and it'll redirect there. But do you mind maybe just sharing a little bit about what you make available? Like immediately, you could just go there and these are free for you. Yeah, 100%. When I say DIY, you can go to our website and you can look at a map of the country and you can select a state and we will answer the questions through that interaction on if you possibly have nexus, either physical nexus because you operate in that state or economic nexus because you exceed some sort of threshold in that state.

15:19There's blog posts, there's white papers, there's items you can download which give you more content and education on it. Obviously, there's the free what's next call or the consultation, which doesn't require anything of you, but to share your situation and you learn a little bit about us. We hopefully give you some confidence in that situation. A lot of free resources that can help you get down this path a little bit as you determine what decisions need to be made for you and your company. Yeah. As well, you've got a podcast. It's called The Salt Cast. It is. Yeah. It's the most popular sales tax podcast on the internet.

16:00I joke. There's not a lot of people that love to interact about sales tax. You own, you dominate the space in podcasting. I was surprised when I went out and saw how many podcasts out there are called the Saltcast. And not everybody's talking about state and local tax. Salt stands for state and local tax. We focus on sales tax. But we do provide some great information there. And oftentimes it's very similar to this podcast. We're just chatting back and forth with individuals in the industry or internally about issues that come up, issues that we see, and stories that people have faced and what we did to help move them in the right direction.

16:43Yeah. Again, PeisnerJohnson.com or TheSalesTaxPeople.com. If someone says, listen, I'd love to chat, what is that process? So I would go to PJ.tax.

17:00pj.tax takes you right to a brief questionnaire and form that allows you to share a little bit about your situation and set up this what's next consultation yeah and no that was literally pj.tax tax that's it so that's that's the uh the tld or whatever the uh the extension is yep and it's how can we help? And just awesome. Great. Well, listen, great conversation. Thank you so much for doing the work that you do. Again, Jason Parr, CEO of The Sales Tax People, aka Peisner Johnson on the web at peisnerjohnson.com, the salestaxpeople.com or pj.tax. But a great, great, great conversation. Thanks so much, Jason.

17:47Ditto, Josh. Appreciate it.

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