Multi-level sales is big business — $178-billion-a-year big business — with more than 92 million independent consultants worldwide repping everything from clothing and jewelry to wellness, nutrition products and home décor. It can also be a risky venture, with higher-than-average failure rates and complicated tax compliance rules.
For starters, who is responsible for reporting sales tax? That depends. Some states require each independent consultant selling in that state to register to collect and remit sales tax. Others offer a tax collection agreement where the direct sales company can do this on behalf of their consultants. State rules vary on collection, reporting and remittance as well as on annual income, commissions and sales thresholds for compliance. Direct selling organizations must also obtain reseller permits and track exemption certificates for any wholesale transactions to their independent consultants.