Why Do I Have An E.N.P. Fee, and What Is It?
Why? Short answer? The government!
The long answer starts with what happened last year. As for what it is, it’s our “Economic Nexus Precaution Fee.”
For the best understanding, just do a web search for “North Dakota VS Wayfair.” Or check out this article by TaxJar. Then you can read till your heart’s content (or, if you’re a small business owner selling online, your heart will be anything BUT content).
The nutshell is this:
On June 21, 2018, the U.S. Supreme Court handed down a decision in South Dakota v. Wayfair, stating that states are able to charge tax based on economic nexus.
This means that companies that earn above a certain threshold, OR who make a certain number of transactions in a state, now have to charge sales tax, even if they have no physical presence in the state. Physical presence was the previous criteria since 1992 for having a nexus and consequently being required to collect sales tax.
This affects all ecommerce businesses, not just us. From independent authors to Etsy owners, to apparel sales, and even digital services, this has far sweeping ramifications. We want to be compliant, and the fee we are charging is in anticipation of what’s next in your state.
So, how that does affect me?!!
Essentially, we’re charging this fee to select states where we may become liable to pay sales tax because we’re a “remote seller” (selling over the internet with no physical presence, or nexus, in the state). Each state has it’s own rules regarding this, many of which are brand new and currently fluctuating. As you can imagine, it’s rather time consuming and costs money to both become a remote reseller and understand, file, and keep up with all local tax laws in the 45 states that charge sales tax, which often vary from county to county and product to product.
As we continue to watch and learn each state’s new laws, we are collecting this small fee in case we then become retroactively responsible for the sales tax we did not charge you on this order. In many states, we’re being charged sales tax already on the production and shipping of your garment, so the reason this fee is rather small is because it’s based on what will become the marked-up amount, or the amount we’d actually owe sales tax on that hasn’t already been covered by us.
What If You Never Become An Economic Nexus In My State? What Happens To My Money?
If we do not end up having an economic nexus in your state, and we charged you the E.N.P. Fee, that amount will then be added to the proceeds. We’ll then split it up and donate it to your supported cause, the same way the current proceeds are.
Thank you for your understanding in this. We’re trying to be as responsible as we can in this new territory, and we hope our transparency helps you understand the fee, our situation, and our direction.