The Confusing State of States’ Sales Tax

April 9, 2019

Confusion has been the consistent word whenever we speak of regulations and how they are interpreted and applied to the ecommerce retailer. Usually we are discussing the FDA or FTC impact on regulatory compliance but now we can add taxation and each State’s opinion of same to the discussion. In June 2018, the Supreme Court in South Dakota v. Wayfair decidedly made the ecommerce dietary supplement sellers’ obligation toward regulatory compliance even more confusing and onerous. For decades the ecommerce world enjoyed a type of discount not shared by their brick and mortar retail counterparts. The sales tax exemption supported by the previously recognized 1992 decision Quill Corp v. North Dakota, which set the property or employees standard for sales taxes using the Court’s commerce clause power to restrict state sales taxation of interstate Commerce. “Nexus” became a term putting a target on many ecommerce retailers whether they did business with large etailers such as Amazon or direct to consumers. The term nexus was previously defined as having a physical presence in a state. Now you are required to collect sales tax in states where there is sales tax nexus and product taxability. This chart indicates the number of states that now have economic nexus.

There are several ways to have sales tax nexus in different states:

  • A location: an office, warehouse, store, or other physical presence of business.
  • Personnel: an employee, contractor, salesperson, installer or other person doing work for your business.
  • Affiliates: Someone who advertises your products in exchange for a cut of the profits creates nexus in many states.
  • A drop shipping relationship: If you have a 3rd party ship to your buyers, you may create nexus.
  • Selling products at a trade show or other event: Some states consider you to have nexus even if you only sell there temporarily.
  • Inventory: Most states consider storing inventory for sale in the state to cause nexus even if you have no other place of business or personnel.

Most Amazon retailers were previously able to escape state sales tax issues because of the lack of location or personnel in the state which would require sales tax collection. By now including the inventory requirement for the establishment of state sales tax the challenge of compliance becomes exponentially more difficult. Even if your company only sells to “Amazon” the reality is the location of the distribution facilities establish an inventory consideration. Amazon now has fulfillment centers in these sates:

  • Arizona

  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Nevada
  • New Hampshire
  • New Jersey
  • North Carolina
  • Ohio
  • Pennsylvania
  • South Carolina
  • Tennessee
  • Texas
  • Virginia
  • Washington
  • Wisconsin    

Not all products are sold into all fulfillment center consistently, but the requirement is established when they do. There are economic considerations in each state that may make the obligation unnecessary, but the requirements must be considered in each state that collects sales tax. Only Alaska, Delaware, Montana, New Hampshire and Oregon do not have sales tax so no concern for reporting exists. In all other states the laws and regulations for filing must be monitored and followed to avoid fines and penalties. While the FDA considers dietary supplements a food, state sales tax regulations routinely do not and usually tax the products more like tobacco and alcohol.

The tax rates that are charged vary from state to state. Kansas does not tax dietary supplements if they are sold with a prescription. Illinois taxes dietary supplements in the same classification as drugs at a 1% rate.

When the consumer is shopping on Amazon they can see what the estimated sales tax will be and use that information to determine their final price just like in a brick and mortar counterpart. But only if the counterpart has this sign in place as is the case on Amazon as found at ( Help: About Tax):

How Tax is calculated:

The amount of tax charged on your order depends on many factors including the following:

  • The identity of the seller

  • The type of item or service purchased

  • The time and location of fulfillment

  • The shipment or delivery address of your order

These factors can change between the time you place an order and when your shipment is complete. As a result, the tax calculated on your order may change. We provide an “Estimated Tax” is displayed at Check Out when confirming an order. The amounts displayed as estimated tax may then be updated later when your order is finalized and completed.

Also, Amazon was touted for deciding to collect sales tax where applicable. But there’s a big loophole — shoppers don’t have to pay sales tax when they buy from one of the site’s many third-party vendors. This loophole creates an estimated loss of tens of millions of dollars of state sales tax since the vast majority of Amazon sales flow through these 3rd party sellers. Which brings us back to the responsibility that rests on sellers to maintain the regulatory compliance requirements in place regardless of how onerous or confusing they may be.


Anthony Reyes
Author: Anthony Reyes

Unlock the Power of Transparency: Schedule a Meeting Now

Ready to Illuminate Your Path?
Partner with Trust Transparency Today.

Get inTouch

Lori Diez

Lori Diez combines compassion and excellence to lead organizations to their next level. A small-town Texas childhood taught her the value of hard work and relationships, which she uses to foster teamwork that brings results that have transformed cultures and programs to their highest potential. Her successful career in pharmaceutical and nutraceutical sales leadership and event hosting has prepared her to deliver results as the COO of TrustTransparency, where she uses her industry knowledge to ensure that the company’s operations run smoothly as they support nutraceutical companies in their mission to help others. Lori’s passion for charity reflects her belief that individuals working together can change the world, no matter how small their contribution to the effort. This year, she looks forward to continuing over a decade of service at the Houston Livestock Show And Rodeo, where she will be the Chairman of the Livestock Committee.

Conference Handouts

Conference Handouts

CoQ10 Statin Associated Myaglia Meta Study Barry Tan 0618 Case Study

CoQ10 Statin Associated Myaglia Meta Study Barry Tan 0618 (1)

Statin Q10 Effect Case Study

Statin Q10 Effect Case Study

Schedule Consultation with Trust Transparency

Glynnda Steinford

Glynnda Steinford, Trust Transparency Consulting’s Director of Customer Relations, brings over four decades of healthcare experience to her vital role in client engagement and relationship building. Her diverse background spans from administering medical groups to impactful stints in pharmaceutical and nutraceutical sales, all underlined by her degree in Healthcare Administration.

At the heart of Glynnda’s work is her talent for nurturing long-term connections, a skill she leverages to enhance client experiences and partnerships within the consultancy. Beyond her professional commitments, she enjoys life’s simple pleasures, whether it’s her love for cats and cooking or her ventures into golf, always prioritizing cherished moments with family and friends. Her personal interests echo the dedication and warmth she extends in her professional network, making her an invaluable asset to the team.

Caiti Dowden

Caiti Dowden stands as a crucial pillar at Trust Transparency Consulting, bringing invaluable insight and expertise to her role as Senior Executive Assistant’ since her start in 2018. With an academic background from Sam Houston University and a career shift from education to the nutraceutical sphere in 2010, Caiti has cultivated a sharp acumen for dissecting industry trends and bolstering strategic decision-making.

Her transition from Data Analyst reflects her growth and deep understanding of the business landscape. Caiti’s commitment goes beyond professional excellence; she thrives on balance, drawing from her rich life outside of work to enhance her organizational contributions. Whether it’s family time, volunteering, or rooting for Houston’s sports teams, she believes in embracing experiences to fuel her professional creativity and insight.

In her current role, Caiti’s dedication to dynamic business analysis and operational support proves her to be an irreplaceable asset to our team, embodying the synergy of personal enrichment and professional success.

Pam Hilpert

Pam Hilpert, Chief of Staff at Trust Transparency Consulting, has been instrumental in the firm since its inception, leveraging her 17 years of accounting experience, including a significant tenure in the nutrition sector. Her collaboration with Scott Steinford spans various successful ventures, emphasizing her integral role in the company’s financial and strategic initiatives.

An alumnus of Sam Houston State University, Pam holds degrees in both Business Administration and Accounting, as well as an MBA, adding academic heft to her practical industry insights. Beyond her professional prowess, Pam is passionate about family, enjoys live music, delves into quilting, and volunteers at her church, reflecting her well-rounded life.

Her multifaceted expertise and longstanding dedication make Pam a cornerstone of Trust Transparency Consulting’s operational strength and team unity.

Scott Steinford

Scott Steinford, a trailblazer in strategic leadership, boasts a certified M&A background, having navigated companies from their genesis to industry prominence. His brainchild, Trust Transparency Consulting, born in 2007, stands as a testament to his dedication to ethical business practices and strategic foresight, offering industry stakeholders invaluable guidance.

Beyond founding and steering companies, Scott has enriched the business landscape with his insightful keynotes and prolific written contributions, emphasizing his commitment to elevating industry standards. His executive tenure shines in roles as CEO or President of for-profits like ZMC-USA and Doctor’s Best, extending to significant contributions in non-profit sectors.

Notably, Scott’s influence is a driving force in the CoQ10 market, where his leadership has significantly bolstered the ingredient’s global presence. His roles in various capacities, including as a New Hope Ambassador, keep the community informed, providing in-depth industry reports and insights.

An active advocate within professional associations and an Editorial Advisor for leading industry publications, Scott’s expertise is both recognized and sought after. With academic roots in Pre-Law and a Master’s in Law, his journey transcends textbooks, embodying real-world business acumen and transformative leadership.

Scott Steinford merges visionary entrepreneurship with principled leadership, creating a legacy of innovation, growth, and unwavering commitment to industry excellence.