A very material case for auctioneers at the Supreme Court of the United States was decided June 21, 2018. The decision can be read here: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf
In simple terms, prior to June 21, 2018, an auctioneer/seller in Vermont (or any state other than South Dakota) selling/shipping something to someone in South Dakota, that auctioneer/seller probably would not have collected sales tax from the buyer, as the auctioneer/seller didn’t have a physical presence in South Dakota.
South Dakota claimed that since that lot was shipped to a buyer in their state (took possession in South Dakota,) that South Dakota sales tax (in that particular tax jurisdiction) should be collected. The Supreme Court of the United States two days ago agreed, and burdened the vendor with that responsibility.
What happens now? It seems certain that almost all states will begin to write laws dictating sales tax on purchases out of state, being shipped to buyers in state — thus taxing interstate commerce; there would be no reason these states would take any other action as this will result in more sales tax income for those states.
Sales tax collection for nearly all states (in about 10,000 tax jurisdictions) is terribly complex. Each of these jurisdictions can and do have their own taxing criteria, taxing one type of personal property or not taxing — or charging different rates — for another. There are even some different tax rates for the same property depending on how it is utilized or the purchaser’s use status.
As has been discussed, it’s possible that a state’s sales taxing criteria or method is too complex, and thus creates an undue burden that could be challenged in court. States will have to endeavor to have a workable interstate taxing system to avoid a challenge. Incidentally, South Dakota’s taxing methods are fairly straightforward.
What happens down the road, even maybe a year or two from now? It seems unlikely Congress will take any action to undo this court decision. Will online auction platforms incorporate tax tables and appropriate collection mechanisms? Will some software company create and maintain a sales tax lookup table? Will states make their taxing criteria simple and easy somehow?
Maybe most importantly, can you as an auctioneer disclaim or assign your responsibility to collect this tax, say in your terms and conditions? It seems very unlikely that your terms can counter state law, nor that any state will entertain your terms as having any effect. Spending time looking for a workaround will largely be a waste of time.
At this moment, June 23, 2018, auctioneers have no changes to address — as there has been no actual action on this court decision. It will be prudent to stay in touch with the National Auctioneers Association (an informational page is here: http://www.auctioneers.org/auction-tax) and your respective state association(s,) which will all have current information.
Also, Andy Imholte (with the help of John Schultz) has maintained a site here: https://www.auctiontax.com/ which is centered on this interstate tax issue as it pertains to auctioneers. Andy and John are doing an outstanding job staying abreast of this subject.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.
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