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Why Snap Collects Sales Tax and Why it Matters

Why Snap Collects Sales Tax and Why it Matters

Being from Chicago, Illinois a state that famously can’t balance its budget, they regularly take it out on their residents. It comes in all forms such as, “temporary” income tax hikes that never go away, record high property tax, and sales tax...etc. This high cost of living is what brought me to the internet for essential items as an easy way to save 10%, especially with Amazon Prime 2-day shipping! Today I seek out the companies that charge sales tax, here’s why.

On November 1st, 2017, Snap was one month old. We had less than 100 sales, all through Amazon’s service FBA (fulfilled by Amazon). FBA allowed us to offer Prime 2-day delivery across the United States; it was a no brainer we had to use it. What we didn’t realize was that we now had inventory in 10 states, meaning we now had to collect sales tax in all those states, by law. Internally we jokingly argued “the states will have to catch us first” our accountant eventually convinced us, that if we wanted to be around for years to come, we had to do it by the books. We paid the back taxes on the 100 orders out of pocket and decided to put America first.

A few short months later, the Supreme Court decided on South Dakota vs. Wayfair an online sales tax case. The ruling was in favor of the state, stating if an online company sells into the state of South Dakota, they are obligated to collect and remit sales tax for the purchase. This case changed the marketplace; you no longer needed a physical presence in a state to be required to pay sales tax. Today 45 states have created their own rules of a volume of sales in the state per year before you’re required to collect and pay sales tax.

You may be wondering why Wayfair would go after South Dakota Let me explain; South Dakota claimed that states were losing out on billions of dollars’ worth of sales taxes revenue. They set a new law in place requiring internet companies to collect and remit sales tax, or the consumer had to pay use tax. This law overturned a previous decision by the Supreme Court in Quill Corporation vs. North Dakota. When companies like Amazon come into a marketplace, they starve the local economy. Some have calculated that across all states they lost $33 billion in sales tax revenue in 2016 alone! South Dakota alone lost $48 – $58 million; they claimed that the state was losing massive amounts of sales tax revenue that was necessary to fund education, health care, and infrastructure.  

Why it matters, when you choose to purchase from a seller that doesn’t collect sales taxes, you’re taking a risk. When the seller does not collect, they are passing the burden on to you. This burden is that you now must pay use tax to your state and local jurisdiction. Yes, you still must be "caught." However, there’s more transparency now between companies like Amazon, eBay, Walmart...etc. Because of this case, they’re sharing that X was sold here and this is how much sales tax should have been collected/paid. If it’s a foreign company, you’re the easier target to penalize and charge taxes. The sales tax landscape is currently constantly changing all in a direction to crack down on sales tax dodging.

All in all, it is important to pay taxes because when the states don’t have enough revenue, they find other ways to milk the cash out of you. Buying from a company that collects sales taxes is supporting the local economy. We are currently collecting in 31 states and will be in 45 states by the end of 2019. Choose companies that choose to put America first.

***Please note that each state has its own rules and regulations and this may not apply to all states. This information is also subject to change.*

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