Updated on August 29, 2023

Do you export goods or services to the United States? You may be required to collect commodity taxes even if you do not have a physical presence.

The United States Supreme Court June 21, 2018 ruling in the South Dakota v. Wayfair, Inc. et al. case has paved the way for significant commodity tax changes to reflect the e-business upsurge.

As a result of this decision, economic presence provisions may now be sufficient to trigger nexus, that is, a connection that requires that you register with a state’s tax authorities.

In general, the States require that businesses register for and collect the Sales & Use Tax if their annual sales exceed a certain amount in the state, in terms of number of transactions or dollars, even if the business does not have a physical presence (e.g., offices, inventory or employees).

Among other criteria, these states set a minimum threshold for sales (generally US$100,000 of taxable goods or services) or number of transactions (200 in most states). As an exception, New York and California have a threshold of $500,000 and a handful of other states have a threshold of $250,000.

Additionally, some states include non-taxable and taxable sales tax when calculating the threshold while others expressly exclude it. So, a company might have to register for tax purposes in a state, even if it has no taxable sales in that state.

Different taxation system

The U.S. taxation system differs substantially from ours. Here are the main characteristics:

• Generally, sales tax applies to tangible real property and certain services. Use tax is generally imposed on goods and services purchased outside the state for use or consumption in the state.
• In the U.S., sales tax is not a value-added tax, like the GST or QST, rather it is charged once, to the final consumer, which can be a business.
• This means you are not entitled to any input tax credits. The U.S. tax system is based on exemptions rather than tax refunds through input tax credits. For example, sales for the purpose of resale or to manufacturers are generally exempt.
• Most states have a sales tax that applies throughout their territory (there are five exemptions: Alaska, Delaware, New Hampshire, Montana and Oregon). There is no federal sales tax.
• In most states, a local tax may be added, depending on the municipality, district or county where the transaction occurs.
• There may be specific provisions in counties or municipalities. For example, a good or service considered non-taxable by a state may be taxable for certain local tax purposes.

Is your business in compliance?

With the new nexus concept, businesses that export to the U.S. must be doubly alert to ensure that they comply with the tax rules in effect in the various locations they do business. We suggest paying special attention first to the states where your presence and number of transactions is the greatest.

Here other important considerations:

• Monitor your sales in each state to ensure that you satisfy the tax rules at all times.
• If you have nexus (physical or economic presence) in a state, you could have to file sales tax returns on a regular basis even if no tax was collected. Please note that the limitation period does not apply to return periods for which returns are due but not filed.
• Make sure you obtain and keep all the documentation that proves the tax-exempt status of your sales in a state.
• There are voluntary disclosure programs to rectify your situation if you failed to collect taxes that should have been.

Nevertheless, if you do business in several states, managing your tax liability may become somewhat complicated. You would be well advised to call on specialists. Contact our experts for personalized support.

If you’re a manufacturing SME, you’ve got a lot to gain by taking the industry 4.0 shift … and a lot to lose if you don’t!

On the positive side, the technologies to initiate a digital shift are more accessible and numerous resources are available to help.

WHAT IS 4.0?

Considered the fourth industrial revolution, 4.0 is characterized by the integration of digital technologies into manufacturing processes. The transition to 4.0 can be undertaken in phases, in line with your needs. The benefits can be derived by approaching the shift one project at a time.

Our team recently reviewed Quebec and Canadian studies on the topic, which illustrate that innovation and industry 4.0 are more essential and profitable than ever.

According to entrepreneurs consulted in connection with SITQ’s Baromètre industriel québécois 2018, manufacturers that don’t embrace this shift run the risk of disappearing in a few years. They believe that businesses have to innovate to stay competitive and meet their customers’ requirements.

To stand out in your industry, provide your customers with experiences that evoke positive and memorable emotions.

You don’t always need to invest in costly technological or operational projects to innovate in this field. Improving the client experience is primarily an everyday business challenge that must be placed at the heart of your SME’s culture and strategy.

With this in mind, it’s your role, as business leader, to clearly define the client experience you want to offer and make it a priority that engages all employees. Remember that today, above all else, clients (individuals or businesses) are looking for speed and simplicity in their interactions with suppliers as well as increasingly tailored service offerings.

Know your client well

Where can you find new ideas to enhance the client experience? Of course, you could get inspiration from the best of the best in the industry, but first and foremost, it’s all about being able to listen to your clients and knowing their expectations, what they want to live as a rational, emotional experience, and only then will you discover how to improve your delivery.

While some expectations are clearly defined by your clients, others are unclear or not defined at all, but they still exist and therefore can influence your clients’ behaviours.

You can use various methods for determining their expectations and actual needs.

Traditional methods

• Perceptual surveys;
• Mystery clients;
• Analysis of the records of complaints and comments;
• Operational follow-ups after a transaction, etc.

Social media

They allow you to maintain a constant dialogue with your clients.

New technological tools

You could gather continuous information about your clients using advanced analytical tools, for example. These will help you analyze your data, determine client trends and decode their behaviours.

Regardless of the method, it’s much more than just asking them for a list of desired improvements, hoping to foster their loyalty and inclination to recommend your products and services.

Make the most of new technologies

New analytical and artificial intelligence tools enable you to get to know your clients well by analyzing large quantities of data from a variety of sources: client databases, transaction history, email communications with clients, comments on social media, etc.

Fortunately, technological development in the past years have made these technological tools more and more affordable for SMEs. They can help you analyze the current client path accurately and detect what’s really important for clients and what can irritate them. This way, you can improve in the way they really want.

Think, for example, of automated management applications where suppliers can monitor their client’s inventories in real time (B2B) in order to always have sufficient quantities on hand. On the other end of the value chain, think about clients that can follow the progress of their order and be informed in real time of delivery time frames. Also, think about personalization tools on e-commerce websites where consumers have the possibility of configurating products based on their preferences.

Engage your employees

Lastly, in the same way you have a conversation with your clients, you should continuously maintain a client experience dialogue with your employees. It’s the best way to give this topic all of the importance due and mesh it with your business culture.

Furthermore, since the client experience is delivered on a daily basis, interaction by interaction, your employees are at the heart of this delivery experience and are also an invaluable source of improvement ideas.

In recent years, managers have tended to be very present in the field in order to supervise employees’ activities and coach them, for example. This helps gather comments to improve and discuss the client experience, while ensuring that the guidelines are followed by all staff.

As a result, you will improve the client experience, little by little, every day, by making small gestures that will add up and help keep you at the forefront of this game.