This April the Supreme Court of the United States will hear the case of “South Dakota vs. Wayfair.” The decision expected in June could have a crushing impact on the auction industry. At the heart of the case is the ability for a tax authority to collect tax from businesses outside the physical tax jurisdiction. Since 1992, a business needed to have a physical presence in the area where the taxes were being applied. This law stands to change that.
The rationale behind the South Dakota law was designed to create a level playing field between classic brick and mortar retailers and online retailers. Additionally the law will assist the tax authorities in collecting more revenue. It does not factor the incredible burden this change would impose on auctioneers.
If South Dakota is successful, every auctioneer may be responsible for collecting tax based on the buyers location. There are over 9,500 different taxing authorities each with their own sets of rules, rates and exemptions. For an individual auctioneer that sells a variety of merchandise nationally, the burden for collecting and reporting would be devastating.
Wavebid is an integrated auction management software for hundreds of auctioneers. Our tools are used for accounting, settlements and much more in the daily operations for many businesses. We are actively following this case and have started the planning to develop the architecture necessary to support a system where the auctioneer would need to report to hundreds or potentially thousands of tax authorities each year, quarter or month.
There is a coalition of auctioneer state and national associations providing relevant content for auctioneers at https://www.auctiontax.com/. This is a exceptional example of leadership from associations to provide members and the auction community as a whole a voice in this truly remarkable event.
We will provide more guidance after the case has been heard and the decision has been published. For the time being know we are actively monitoring the situation and will work to provide a solution if one is needed to our customers.
-Russ Hilk Founding Partner Wavebid