This is a YouTube video titled "Disruptive Ecommerce Innovation: Sales Tax and More Speaks with Cahoot Order Fulfillment" featuring a conversation between Manish Chowdhary, founder and CEO of Kahoot, and Michael Fleming of Sales Tax and More. Recorded in April 2019, the discussion focuses on the complexities of sales tax for ecommerce sellers, the impact of the Wayfair Supreme Court case, and how joining the Kahoot network affects sales tax responsibilities for marketplace sellers.
I'm Manish Chaudhary, founder and CEO of Kahoot. I'm joined here with one of our partners, Michael Fleming of Sales Tax and More. Michael, welcome.
Thank you. Glad I'm here.
And please tell us a little bit about sales tax and more.
Well, Sales Tax and More is a consulting and solutions firm. We're sales tax specialists. Pretty much all we do is help companies determine where they may have a responsibility to file sales tax. You know what their nexus is? We do registrations and returns.
Awesome. And you work quite a bit with marketplace sellers, e commerce sellers. You are a speaker, have been a speaker at this conference. I've heard you speak at asgtg, all the premier Amazon conferences. You are a subject matter expert. So please tell us about the landscape briefly, about what's happening with sales tax and marketplaces and sellers.
Lots of things going on, lots of change happening. You know, it's literally changing from day to day. One of the big driving factors is the Wayfair case. And this happened last June 21st. It was a US Supreme Court case and it pretty much threw out the concept of needing physical presence in order to create a link with the state where the state could require you to collect its sales tax. So you've got all these states who for years have been trying to figure out how to tax E commerce. Now the US Supreme Court has paved the way for them. Now what makes it complicated is the states have always believed that having inventory in an Amazon warehouse creates nexus. And that's not gone away. So in addition to the states looking for this new threshold, they're going to be pursuing the other types of nexus. The good news is that we've got a parallel trend where the states are forcing Amazon to collect tax on on behalf of sellers. And that's not going to happen overnight, but over the next two, two and a half years. I think that's the good news. If you're selling only on Amazon, your sales tax problems may go away. But states are going to get pretty aggressive between now and then. So you're going to want to take steps to protect yourself. And if you're selling on multiple platforms, then that could also be problems for you.
Sellers, especially marketplace sellers, are now going to see some of this impact their margins. You know, collecting sales tax is not as easy as passing all of that to the end consumer who has been conditioned for a very long time to expect things for free or not have to pay sales tax, which the sellers were able to use that money to reduce their cost and reduce their price. Now they have this additional burden, which means their margins are even more compressed than they were. And that's where Kahoot comes in, is that this is a revolutionary network to help sellers save money with shipping costs, reduction in improving their margins by improving their cost of shipping, getting the customers faster. So one of the questions that our customers, the Kahoot members or prospects that are looking at Kahoot regularly ask is, will joining the Kahoot network create any additional burden for them with respect to sales tax? Michael, can you talk a little bit about that?
Now, I've looked at the way that your system works here. The network works and, you know, if someone has Nexus already, it's not going to, you know, change any of that. If you have a responsibility to collect tax, you have a responsibility. And if you have a responsibility, I don't see how joining the network creates that responsibility for you. Really doesn't matter who's making the delivery for you. It matters if you have Nexus in the delivery state. This linker connection, nexus is just a fancy word for that what you sell is taxable. And, you know, if your total exposure, your total sales into that state of material, so those things don't change. Oh, last thing is Amazon collecting the tax. So if they're collecting the tax, you don't have to worry about it, but if they're not, that's when you have to worry about all these other things. And I really don't think that your network is going to change.
Right. And so essentially, sales tax is primarily driven by where the customer is located. And if you have Nexus in that state already or others. But by simply joining the Kahoot network and having a partner ship the item to your customer on your behalf does not create any new additional Nexus or burden.
