Believe it or not, sales tax is even more complicated than the above graphic with nearly 10,000 total jurisdictions and different rules for races, memberships, nonprofit events, and merchandise across those jurisdictions.
About a year ago the US Supreme Court struck down a 1992 landmark decision (Quill Corporation vs. North Dakota) that had previously barred states from seeking sales tax from businesses unless they have a physical presence in the state. The 1992 decision had allowed online ecommerce businesses to thrive by not having to comply with the myriad and complex state and municipal sales tax rules found in the 45 states that charge a sales tax. The decision by the Supreme Court in South Dakota vs. Wayfair Inc. cleared the way for states to seek sales tax from out of state online sellers.
Since that decision states have been busy updating their sales tax laws to incorporate minimum requirements for out of state sellers to trigger economic nexus to collect and remit sales tax on sales of taxable items into their states. Additionally many states have adopted marketplace facilitator laws which require marketplace platforms to collect and remit sales tax on behalf of their third party sellers.
RunSignup is paying attention to the dynamic change in sales tax laws and is preparing our platform to better assist you with your obligation for sales tax and collection on taxable items that you may be selling on the RunSignup site. RunSignup is also getting ready to take on the collection responsibility in Marketplace states where we may be required to collect and remit on behalf of races and other events selling on our site.
We are preparing a taxability study that will indicate where we believe common items sold on our site, like race registrations, merchandise, club memberships and processing fees may be taxable. We are contracting with a sales tax automation provider who we will connect with by API to deliver the appropriate local, county and state sales tax rates necessary for your race at the time of registrant check out. We are simplifying the process of turning on sales tax calculation and collection for your races on the RunSignup site and giving you information to help with your decision about the taxability of what you are selling. We are building reports to help you with your sales tax reporting to states where you are required. We are also preparing to collect and remit sales tax on behalf of races in certain marketplace states where we are required.
In the short term in preparation for this sales tax project we are making some changes that we think will simplify the environment for calculating, collecting and remitting sales tax.
- We are discontinuing the “Quickstart” account types on RunSignup, which also include the payment account “set up later” functionality. Quickstart accounts create sales tax responsibility issues that we would prefer to avoid. Quickstart accounts will not be available for new payment accounts. If you currently have a Quickstart payment account type you will be required to update to an Advanced account at the time of new race creation or renewal on RunSignup. RunSignup may also update your account to an Advanced type if we have the information necessary to onboard your account with WorldPay who handles our Advanced account type.
- We will be discontinuing the ability to make additions to the refund reserve for Quickstart direct deposit account automatically using the RunSignup system. You will still be able to add funds to those accounts with a credit card transaction or by check.
- We will also be discontinuing the option to allow races to enable and pay for RaceJoy using the processing fee option. RaceJoy will continue to be available through the buyout and certified timer options.
- We are discontinuing the sale of gift certificates (although this was not a popular option as only 94 gift certificates were sold last year compared with over 5,000,000 total registrations)
We will be providing additional information and updates over the coming weeks and months as we roll out updates to the RunSignup system designed to help us all with our sales tax requirements.