The Trump Store and sales tax – Wacky Tax Wednesday

President Donald J. Trump has often pointed out that Amazon doesn’t collect sales tax in all states; his tweets on the topic are numerous and well publicized. So, like many, I was surprised to learn that “TrumpStore.com, the official retail website of The Trump Organization,” collected and remitted sales tax in only two states as of early April 2018. And New York wasn’t one of them, although The Trump Organization is headquartered there.

Businesses are required to collect and remit sales tax wherever they have nexus, a connection substantial enough to merit a tax collection obligation. Like all sales tax laws, nexus varies by state — but in all states, it’s established when a business has a substantial physical presence in a state, like a store or warehouse. Or headquarters, presumably.

Headquarters aside, TrumpStore.com seems to have had a pretty strong connection to New York from the outset. The online store, which launched November 2017, invites consumers to visit its “brand new Trump Tower flagship retail store” in Trump Tower, New York, NY. Another page informs that “online purchases can be returned to our flagship store at Trump Tower for an immediate exchange or refund.”

According to the New York State Department of Taxation and Finance, “Whether you operate from a store or sell goods or services from your home, [or] over the internet, … you will need to register for sales tax if you are considered to be a vendor. You are a vendor and must register with the Tax Department if you sell tangible personal property or services that are subject to sales tax,” and do any of the following:

• Maintain a place of business in the state, such as a store, office, or warehouse
• Solicit business in New York State through employees, independent contractors, agents, or other representatives
• Solicit business through catalogs or other advertising material, and have some additional connection with the state

Furthermore, New York was one of the first states to adopt an affiliate nexus law. It requires remote sellers to collect and remit New York sales taxes if they use a trademark, service mark, or trade name that’s the same as an affiliate business located inside the state. TrumpStore.com, which sells many items emblazoned with the name Trump, certainly seems affiliated with the Trump brand in general, and the Trump Store in Trump Tower in particular.

Yet as of April 4, 2018, TrumpStore.com only collected and remitted sales tax in Florida and Louisiana. After being outed for possible sales tax non-compliance, the online store quietly added collection services in Virginia a few days later, and in New York in early May.

Here’s a timeline of events:

Two states

Where TrumpStore.com did or didn’t collect tax escaped the public eye until April 4, 2018, when the liberal website Red State Disaster published Donald Trump Attacks Amazon While His Own Website Doesn’t Collect Sales Tax (a story later picked up by The Wall Street Journal). As TrumpStore.com corroborated at the time, the ecommerce store collected and remitted sales tax in only two states: Florida and Louisiana. Not New York.

According to an April 6 blog by the Institute on Taxation and Economic Policy (ITEP), “It seems likely that the presence of a New York location should be enough to put TrumpStore.com within reach of New York’s sales tax collection laws.” Yet in early April, a TrumpStore spokesperson told The Wall Street Journal, “Trumpstore.com has always, and will continue to collect, report, and remit sales tax in jurisdictions where it has an obligation to do so.”

Three states

Yet on April 9, 2018, news broke that TrumpStore.com had started collecting tax in Virginia. The Washington Post (owned by Amazon CEO and founder, Jeff Bezos) couldn’t resist a jab: Why Trump’s online store collects sales tax in three states — while Amazon does for 45 states.

Brief backstory on Amazon and sales tax: Amazon’s policy toward sales tax collection has evolved over the years. In 2011, it collected tax in only a handful of states and resisted collection elsewhere. As of April 2017, it’s taxed sales of its own products in the 45 states that have a general sales tax, plus the District of Columbia. However, the ecommerce giant still doesn’t collect on its third-party, or marketplace, sales in most states (more about taxing marketplace sales).

Four states

On May 3, 2018, the ITEP published another blog: Under Pressure, Trump Organization Abandons Risky Sales Tax Avoidance Strategy in New York. Will It Face Penalties for Taxes It Did Not Collect?

Sure enough, TrumpStore.com now says it collects and remits sales tax in four states: Florida, Louisiana, New York, and Virginia. No additional information is offered, but that’s not unusual. As Amazon gradually increased the number of states where it collected and remitted tax, it simply added states to the growing list.

Physical presence under fire

How states can and can’t tax out-of-state sellers has been much in dispute for decades, and numerous states have challenged the physical presence limitation. However, the Supreme Court of the United States has upheld it, most recently in Quill Corp. v. North Dakota (1992).

Quill notes that “Congress has the ultimate power to resolve” the issue and “remains free to disagree with our conclusions.” It further states that “Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes.” Yet despite the introduction of several bills that would expand (or further constrain) the states’ ability to tax out-of-state businesses, Congress has not intervened.

In the absence of federal action, South Dakota has asked the Supreme Court to reconsider Quill’s physical presence standard. The court heard arguments in South Dakota v. Wayfair, Inc. on April 17, 2018, and is expected to issue a decision in June.

In the meantime, many states are still working to increase sales tax revenue from remote sales by expanding their nexus laws. This makes navigating sales tax compliance especially confusing for ecommerce businesses that make sales in multiple states. So, TrumpStore.com can be forgiven, perhaps, if it didn’t get sales tax right at first.

Learn more about sales tax, the Supreme Court, and new laws for online sellers at Avalara Sales Tax 360.