The Wayfair Decision and Parcel TMS
As retailers scramble to comply with the recent judgement, they may find their Parcel TMS may help in surprising ways.
On June 21st, The U.S. Supreme Court handed down a decision on South Dakota v. Wayfair in which the court held that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing jurisdiction. As a result of this decision, omnichannel retailers big and small are now scrambling to prepare themselves to comply to the deadlines dictated by various states.
There are many tax products available in the market such as Vertex that do an excellent job of continually updating the tax rates for >10,000 taxing jurisdictions, aiding in the calculation and returns, managing exemption certificates, and providing the necessary reports. (Since this type of product and other services providers are more qualified to discuss the background of the judgement and how it applies to you, we won’t cover those details. We do recommend you listen to the webcast ”The Supreme Court Wayfair Decision: Now What?” for a little background.)
In addition to optimizing your sales tax software, we believe there may be opportunity within your shipping system to help you are you prepare for these changes. Given that sales tax is clearly way outside of the realm of a Parcel TMS’ span of control, it is only natural that you would ask, “How on earth could such a system be of value in the sales tax function?”
How can a Parcel TMS be of assistance?
The first answer is data. To properly calculate, collect, and remit sales tax you don’t just need a sales tax system, you need data. The challenge many retailers face is the data needed to process is often in disparate systems. Delivery address, line item detail, and (hopefully) exception qualification are located in the OMS, while origin address and ship date are often isolated in the WMS. As this detail is located in two systems - that may function in silos - some retailers find they have to do a manual merging of data outside of core systems to do the necessary tax calculations. If you have a Parcel TMS that houses the full shipping lifecycle information, you may find it to be an excellent source of the consolidated data needed to calculate, collect, and remit.
Second, is in your parcel rate shopping. Historically, at best, shippers are conducting multi-DC rate shops across carriers to find the lowest parcel shipping cost solution prior to dispatching the order to the DC (based upon available inventory of course). With new sales tax implications for these shipments, one should ask themselves, “should the sales tax implications be included in the calculation?”.
While a Parcel TMS would not be of that much use in isolation to help you comply with the new future we face, you may want to look into ensuring your system 1) has the data needed to aid the necessary calculation, 2) is able to use these calculations in multi-DC rate shopping, and 3) can integrate with your sales tax software product.
We realize this piece is very high-level, and if you’d like to drill down on any of our observations, please reach out to us with questions or comments. We also welcome opportunities to deliberate or dispute our insights and recommendations – no conversation is off limits. You are an expert and we'd love to speak with you.