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Small Business Sales Tax Secrets with Chanel Christoff Davis · The SmallBizChat with Melinda Emerson

• 0:00
  There are states enumerated sales tax on physical goods, and that's what we understand.
• 0:05
  Right?
• 0:06
  If you buy a widget, you're gonna most likely have to pay sales tax on it.
• 0:10
  There are rare exceptions.
• 0:11
  Like you said, clothing in your state is not taxable, but in many states, it is.
• 0:17
  So what we understand that, okay, if I buy something tangible and something that I could
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  touch or feel, it's most likely gonna have a sales tax associated.
• 0:25
  3 10,
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  10, technician, liftoff.
• 0:34
  Ending small business failure.
• 0:36
  Welcome to the small biz chat podcast with the number one small business spurt, Melinda
• 0:42
  Emerson.
• 0:43
  Melinda's goal is to end small business failure, and she'll give you the information
• 0:48
  you need to succeed and live the life you dream of.
• 0:51
  Now here's your host, the small biz chat lady herself, Melinda Emerson.
• 1:00
  While you find you to shine on a national stage, your journey to national acclaim begins
• 1:05
  at brand and demand life.
• 1:06
  In Philadelphia this September 21rd to 23rd.
• 1:10
  Don't miss your cheese to transform your brand and skyrocket your business.
• 1:15
  Register today.
• 1:19
  Welcome back to the Small Bench Chat podcast, and now it's time to talk about the money.
• 1:25
  Not the money you make with the money that you might owe to your state.
• 1:28
  My next guest is Chanel Kristoff Davis, and she is gonna be talking to us about what we need to
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  know about sales taxes.
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  This isn't sexy, but it is absolutely area because more and more small businesses are
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  getting in trouble because they don't understand what their obligation is to this
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  state.
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  So let me formally introduce Chanel.
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  She is a tax expert with over 20 years of experience in business operations Chanel is the
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  founding partner and CEO of Davis Davis And Harmon LLC, an award winning sales tax Award
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  winning firm of sales tech experts known as D.
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  D.
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  H.
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  Established in 2001, D.
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  H is the largest woman and minority owned sales tax advisory practice in the nation, DTH
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  Services Corporations by delivering innovative tax solution that returned money to their
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  clients bottom line.
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  Ms.
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  Davis has so much experience in managing client relations and the day to day management
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  decisions of her firm.
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  For more information, go to DTH tax dotcom.
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  Chanel, welcome to the small base chat podcast.
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  Thank you.
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  I'm excited to be here.
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  I'm always happy to talk about that.
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  Alright.
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  Well, first of all, I wanna know what made you become an accountant.
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  And then how did you turn that into an entrepreneurial venture?
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  It's a really good story.
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  So I was the kid that was always the super nerdy math person.
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  I was always in some type of a math program, advanced math classes, math leaps, I was that
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  kid.
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  I just love numbers from day 1.
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  I love relationships of numbers, how they operate, and they relate to each other.
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  I was just I was born this way.
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  Numbers make sense to me.
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  And it's funny because growing up, I always excelled in man.
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  But then in high school, you kinda lose that knowledge and you kinda focus on other things.
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  And then when I went to college, I I majored in business.
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  I was in the college of business, took my first intro to accounting class and made a 100 on
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  every test out the gate.
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  And then I was like, oh, this is a thing.
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  So that's how it happened.
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  So how did you end up starting your firm?
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  So, you know, I always had a passion for entrepreneurship and leadership Even in
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  college, I started the student chapter of the National Association of Black Acountains on my
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  college campus.
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  So I was always seeking opportunities to flex my leadership muscles.
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  So when I graduated from college, I went to Price Waterhouse which became Price Warehouse
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  Cooper as their big 4 accounting firearm and consulting practice.
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  And my goal then was to be the 1st African American partner in the Dallas office.
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  That didn't happen.
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  However, I just thought my own my own firm and became a partner.
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  So We just ventured my my founding partner and I lead venture towards sales tax and, you know,
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  basically, responded to RFP for consultants, and we won the 1st project and never looked
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  back.
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  Love it.
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  Love it.
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  So, that's how you sort of niched into sales taxes was from an RFP.
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  Somebody said?
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  So it was a government, for the state of Texas, it was a RFP, and we we put together our first
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  proposal and submitted our qualifications that we wanted.
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  Love it.
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  So tell me, why are the laws on sales taxes?
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  I mean, sales taxes are one of those things that Do you do you charge?
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  Do you not charge?
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  Does it depend on what you sell?
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  Does it depend on how much the thing is that you sell?
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  Because, for example, where all is no sales tax on closed in Pennsylvania.
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  Unless you buy something luxury, you buy something over $354100, you will pay taxes on
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  or you buy a jacket or, you know, like, a leather jacket or something like that that's
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  that's expensive, you will pay taxes on it.
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  And they call that a luxury tax And I'm like, is that random?
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  Is it, like, certain stores get to charge that?
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  Like, what what is all of that?
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  So let me break it down very simply.
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  So in the United States, because we like to make things complicated.
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  There are 50 states in the union.
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  However, there are 45 states that have an enumerated sales tax on the on the books.
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  So these are on the state's constitution is is written into the laws of the state.
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  So dependent of a state you're you're based in or you're operating in, your state may or may
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  not have a sales tax law.
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  So Alaska, New Hampshire, Oregon, I'm trying to think of all of them.
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  There's a Delaware, Delaware.
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  They don't have a numa a numerated state sales tax law, but, you know, district of Columbia
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  does.
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  Alaska does have a state sales tax law, but the local municipalities and counties all have
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  their own sales tax laws.
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  So every county has their own.
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  So it gets even more complicated and layered as we get deeper into it.
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  So, but what you need to know as a business owner is it's not about where you're located.
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  It's where you're actually doing business.
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  So, for example, If I'm in the state of Texas, but my customers are in California, I may have
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  a responsibility to California.
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  So it's all based on benefit location.
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  So Pennsylvania, you know, where you are up Philadelphia, excuse me, they don't tax,
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  clothing, but in Texas, we do.
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  Every state has different laws on the books.
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  It's all based on the state's legislature and what they deem a priority Well, what's
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  consistent is if you are operating in states where sales tax is a law.
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  States take it very seriously.
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  They used them revenue from those collections to fund everything in the state, education,
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  infrastructure, Bridges and roads are built with sales tax money.
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  Medicaid, all that is used, the money which they collect is used to fund the state's
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  business.
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  So they take it very seriously, and they're very aggressive.
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  So is it different whether you sell things that are physical product versus electronic
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  products, like on the internet?
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  Great question.
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  So that's also based on the state and where you're selling.
• 7:54
  So there are states enumerated sales tax on physical goods, and that's what we understand.
• 8:00
  Right?
• 8:00
  If you buy a widget, you're gonna most likely have to pay sales tax on it.
• 8:05
  There are rare exceptions.
• 8:06
  Like you said, clothing in your state is not taxable, but in many states, it is.
• 8:12
  So what we understand that, okay, if I buy something tangible and something that I could
• 8:16
  touch or feel, it's most likely gonna have a sales tax associated.
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  However, I'm gonna stack on top of that.
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  Some states, sir, tax services.
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  So in my state, landscape landscaping services is taxable.
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  Janitorial service.
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  This is taxable.
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  If you build websites in the state of tax Texas, that is taxable.
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  So just because you have a service, don't fall into the thought process that I don't have to
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  charge sales tax.
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  I can give you one that you guys interact with all the time.
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  Pickbooks.
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  Is a taxable service.
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  Dropbox is a taxable service.
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  Netflix is a taxable service.
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  But your streaming movies is taxable in many, many, many states.
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  Wow.
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  So How do you determine, I guess, is it really that you just really need to be talking to your
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  account about what you should be doing?
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  Well, that's a great question too.
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  So many CPAs don't specialize in his expertise.
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  CTAs are represent the 99% of what the public thinks about when you think about a tax
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  adviser, you think about a CPA, a person that can help you file your income taxes.
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  That is different.
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  We are the unicorn.
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  We're the 1%.
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  We don't operate at all where income tax is concerned.
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  We only focus on transaction tax.
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  Meaning, if you have a transaction in your transacting business in the state, That falls
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  under the realm of sales tax.
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  Sales and use tax.
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  Use tax is different from sales tax.
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  Sales tax is I'm selling something.
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  I have to charge you sales tax on it.
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  Use tax is the business inputs I use or the transactions that I I conduct within my
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  business, I'm using these items to run my business.
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  So I'm buying computers.
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  I'm buying desks I'm buying whatever I need to use to do run my business, that's considered a
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  use tax.
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  So there's sales tax and use tax.
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  So those are different, but that's totally different from federal income tax, which is
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  where CPAs reside.
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  We are still tax advisors to totally different set of laws.
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  Wow.
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  I I think you just made my head hurt with all of that.
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  So so Help me understand.
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  What are some basic rules, like just some basic rules of thumb that people just need to keep in
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  mind?
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  So keep in mind 1 or 2 things.
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  In your operating in any state in the union, but you your business is transacting business
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  in multiple state.
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  You should be aware of what you're doing, how you're showing up in those states, and you can
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  cause a trigger A taxable transaction a number of ways.
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  1 category is physical presence, meaning I'm physically located in the state.
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  I have a brick and mortar.
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  I have a distribution center.
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  I may be sending my trucks into a state to deliver goods and services I may be traveling
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  back and forth into that state to do trade shows.
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  Right?
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  I'm physically visiting a state.
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  To drum up business and to sell.
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  That's physical presence.
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  That can trigger sales tax.
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  Then there's a separate care category called economic nexus.
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  Economic nexus means that I may not be physically going into the state.
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  However, I'm shipping goods into that state, or I'm straining via the net, you know, all will
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  keep naming names, but I may be streaming movies and and music in that state.
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  So I'm not physically there, but I'm selling into that state.
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  The way the state sees it is If you are deriving revenue from my citizens, you may have
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  a responsibility.
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  You don't have to ever show up.
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  You don't have to ever cross the state line.
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  But if you are actually deriving revenue from my citizens, you may have responsibility to
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  collect sales tax in my state.
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  So that is very tricky because if you operate in Oregon, which does not have a sales tax, you
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  may be based there physically, But I'm selling next door to another state that has a sales
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  tax.
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  You probably owe sales tax to this, the neighboring state.
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  So you have to be aware of what you're doing and where you're doing it.
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  But do analysis, look at your revenue generated by state.
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  And then determine whether or not you need help.
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  Now is this a huge issue for small businesses?
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  Like, a small business is getting in trouble with with state legislatures around this.
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  It's a huge issue.
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  This is, a recent Supreme Court case in 20 18.
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  It was Wayfair Versus South Dakota that made internet sales transactions taxable before
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  2018.
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  You didn't have to worry about, you know, economic nexus.
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  It wasn't the issue, but the Supreme Supreme Court agreed with South Dakota, and that
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  changed the whole entire landscape.
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  So now, yes.
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  You can be a Amazon seller.
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  You could be doing fulfillment by Amazon.
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  You could be a small in your mind, small business, But you're you're actually
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  transacting business all over the country via Amazon.
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  You have to be aware of how much revenue you're generating every state.
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  And there are triggers.
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  Some states, it could be a $100,000 in sales that tips you over.
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  Some states, it could be $50,000 in sales that tips you over.
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  Some states is $0, but How many transactions?
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  200 transactions tips you over.
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  So it it varies by state, but you need to be, I guess, aware that this is even a concern
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  because I like to tell potential clients that ignorance is not a defense.
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  If you ever get caught by a state taxing authority, they don't care that you didn't
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  know.
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  They don't care.
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  They what they wanna state, what they gotta tell you is you should have known.
• 14:14
  Alright, Chanel.
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  What is the best business advice you have ever been given?
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  I think in the best business advice, I I wish I hadn't given, but I never was given was to
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  night not isolate myself as an entrepreneur that I should build community early And I
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  didn't do that.
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  I've been in business for 22 years, and I wish that I would have built, you know, joint things
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  like Goldman Sachs, 10,000 small businesses It didn't exist then, but the point I'm trying to
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  make is chambers of commerce, you know, whatever it is, find other like minded people
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  like yourself.
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  Don't isolate yourself because we can be very siloed as entrepreneurs.
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  And when you leave outside of your office and look around, There's a wealth of knowledge
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  around you, but you have to just extend yourself and meet people who are like minded.
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  Thank you so much.
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  You have really given us lots of helpful information.
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  And I'm gonna always remember ignorance is not a defense, so I understand exactly what you're
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  saying.
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  I'm Melinda Emerson's small biz lady.
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  America's number one small business expert, and I will leave you with this last thought.
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  You never lose in business.
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  Either you win or you weren't.
• 15:24
  God bless everybody.
• 15:27
  While you made me to shine on a national stage, Your journey to national acclaim begins at
• 15:33
  brand into man live in Philadelphia this September 21st 23rd, Don't miss your cheese to
• 15:39
  transform your brand and skyrocket your business.
• 15:42
  Register today.
• 15:48
  Thanks for listening to the small biz chat podcast with Melinda Emerson.
• 15:53
  So scribe to this podcast wherever you listen to podcasts and join us next Wednesday for more
• 15:58
  fantastic information and interviews.
• 16:01
  You can find more sources and small business success strategies by visiting Melinda's
• 16:06
  website succeed as your own boss.com.
• 16:09
  Thanks again for listening, and we'll see you next week.