what is the correct process of collecting tax
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Answer:
Pressure on States to Raise Revenue
A combination of shrinking tax bases and upward spiraling spending are forcing some states to seek new sources of revenue. States and local authorities were limited historically on what they could tax. However, this changed when the US Supreme Court ruled on June 20, 2018 that states could tax online commerce in the Wayfair vs. South Dakota decision, reversing the “physical presence rule” in the US Constitution’s “Commerce Clause.” This allowed tax authorities to collect sales taxes on businesses not physically present in the state.
States are likely to become increasingly aggressive in extending their authority to collect taxes from out of state businesses. While in most states sales taxes are paid by the consumer, the seller is obligated to withhold and remit the sales tax proceeds and can be penalized for failing to do so. Acquirers must now determine during due diligence if the target firm has satisfied its obligations to pay taxes that might be owed on sales to customers located in states in which they do not have a physical presence. Therefore, acquirers must be aware of what target products and services might be subject to state and local tax withholding and remittance. If the target firm has failed to do so, the state and local taxing authority may look at past years due to a lack of a statute of limitations resulting in a substantial liability for the acquirer.
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