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The Sales Tax Who, What and Where

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Direct selling is big business — $189-billion-a-year big business — with more than 117 million independent distributors worldwide*, representing everything from clothing and jewelry to wellness, nutrition products, and home décor. And with the distributor compensation complexity factored in can cause some complicated tax compliance rules.

The Who

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 selling company can do this on behalf of their distributors. 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 distributors.

Pick up your print copy of the August 2018 issue in which this article appeared.

The What

Then there are tax rules around what you sell. Product taxability can get complicated quickly for direct sellers who sell into multiple states. Nutritional products, for example. Ten states and the District of Columbia exempt vitamins, food or nutritional supplements from sales tax. Others, like Illinois and Utah, tax them at a lower rate. Similar rule variations and exemptions apply to clothing and food as well. Direct sellers are also subject to use tax on the retail value of the free, incentive-based and promotional products used by or given to distributors, party hosts, and customers.

In some states, shipping and handling charges are considered part of the total selling price and are subject to the same tax rules as the items purchased. In Washington, for example, shipping and freight charges on retail sales to customers are subject to sales tax, while items sold and shipped to a wholesaler (the distributor) are exempted with a valid resale certificate.

The Where

Finally, where you sell comes into play as well. Nexus rules are changing as states continue to stretch the definition of what constitutes “physical presence” and now directly target common business practices associated with direct selling, such as participating in trade shows, a remote sales force, affiliate marketing and online selling.

Keeping track of the “who, what and where” of sales tax can be overwhelming for direct sellers who are simply trying to grow their business. Consider these two options (1) software that manages sales tax in your accounting and billing systems to remove any uncertainty, ensuring the right rates and rules are applied to transactions, the proper tax owed is reported and remitted to the states, and returns are filed correctly and on time or (2) an added burden on your business. Make sure your option helps your independent consultants grow their business and remove potential risk.

Colt Passey

Colt Passey

Colt Passey is a Strategic Alliance Manager at Avalara. He has been with Avalara for 3 years and has over 10 years in sales and business development experience. Colt manages the Direct Selling vertical at Avalara and has helped partners, business owners, and finance professionals in maintaining compliance and leveraging best-practices across the industry.

Dear Direct Selling Colleague,

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Thank you for being part of the DSA Annual Meeting.

Ours is an age marked by transition. As direct selling faces these tides of change, the fight to protect our independent salesforces and their ability to build business on their own terms remains our lynchpin issue.

We have taken note of the cultural moment all Americans experience today – as a country, a marketplace, an industry, and an Association. In doing so, it has become clear that we now face a time not merely for evolution, but revolution.

Building on our longstanding self-regulatory efforts, DSA’s ethics and self-regulation initiative is a bold new program designed to improve the reputation of direct selling companies, our independent contractors, and the direct selling channel.

Pick up your print copy of the August 2018 issue in which this article appeared.

Modeled after self-regulation programs in other industries as cited by the Federal Trade Commission (FTC), this program will rely upon third-party administration, a comprehensive affirmative review of business practices, and industry-wide support.

Sufficient resources will ensure the successful launch and ongoing sustainability of the program.

Such a bold new approach – one that will provide a broader opportunity for direct sellers to address consumer issues and ensure a vibrant future for direct selling companies and distributors – cannot exist without your support. The Annual Meeting proved that the full spectrum of direct selling is ready to step forward and raise the bar in important new ways.

More than ever before, we know that our common challenges are also the source of shared strength. We are stronger together, and only by working together can we preserve direct selling community’s freedom through self-regulation initiatives built on transparency and the commitment to adhere to best practices.

Thank you for being part of this movement and for your contributions to DSA and the business. I look forward to working with each of you toward our successful future.

Sincerely,
Joseph N. Mariano

Do It…Today

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I believe you’ve got to get up every day, keep moving and tackle what’s in front of you.

Life turns on the smallest of decisions, and you never know which ones will prove the most significant.

The shaping events in your life, those moments that in hindsight prove to be crucial turning points, are often events that just seem to happen, out of the blue, the chance confluence of unpredictable circumstances. But the truth is that they don’t “just happen.” You may not be able to plan the results, but that’s okay. If you keep moving forward, focusing on incremental improvement, you’ll put yourself in their path.

This is one of the most deceptively simple leadership principles there is: keep moving forward. People won’t follow you if you’re sitting in the corner sucking your thumb and talking about how bad things are. They’ll only follow you if you’re going somewhere.

“This is one of the most deceptively simple leadership principles there is: keep moving forward.”

If you’re sitting around waiting for something to happen, you’re a stationary target for the bad things in life. A moving target is harder to hit. If you’re in motion, then you’re going somewhere, even if you’re not sure exactly where that is. And as long as you’re in motion, you can always shift your course. It’s an awful lot easier to steer a car that’s moving than one that’s sitting still.

Wrestle the Alligator in Front of You

Pick up your print copy of the August 2018 issue in which this article appeared.

There is a great saying in the military that applies just as well to life as it does to the battlefield: Every plan is great—until the first shot is fired. No one knew this better than Winston Churchill, who took office as prime minister of England in 1940 during a time of extreme crisis. Not only was the first shot already fired, but Europe had already been plunged into a world war. Churchill’s story is an epic tutorial in principled response to chaos and adversity.

“Plans are of little importance,” Churchill once said, though he also added, “but planning is essential.” (George Patton put it a little more bluntly: “A good plan, violently executed now, is better than a perfect plan next week.”)

One of Churchill’s great strengths—one among many—was his ability to hang tough and stay the course. Another was his fearlessness in taking immediate action when immediate action was warranted by the circumstances.

I’ve been to visit the Cabinet War Rooms, the underground complex where Churchill ran the war effort. His desk is still there, preserved in his office, and on it there sits a box he put there with a label that says, “Action This Day.” Not an IN box. A TODAY box. Whether it was five in the afternoon or 2:30 in the morning, the prime minister was not leaving his desk until the last thing in that box got handled. I can’t say I’ve always succeeded, but in my career, I have sought every day to follow that example.

Be in Motion

I may not be big on detailed long-term planning, but I’m very big on being in motion, in action, right now. I drive people crazy when they travel with me because I never check a suitcase. I’ll do a 10-day tour through Europe with nothing but a duffel bag. When we get off our plane, I’m not in the mood to wait around. For me, it’s off the plane and go. When I go through that airport, I’m moving. Even if I’m not sure where I’m going, I’m going to get there fast.

A lot of people seem as if they’re trying to avoid the present. Maybe they do this in the hope that if they just keep their eyes on a better future, then whatever’s going on right now will sort itself out.

“Here’s my approach to problems:
I don’t want to talk about it. I don’t want to think about it. I don’t want to form a committee to study it for the next 18 months. Whatever the problem or challenge is, I want to get it dealt with today.”

It won’t. Whatever challenges or problems you’re dealing with today, they are not going to get better with age. The only thing they’re going to do with age is get worse. Here’s my approach to problems: I don’t want to talk about it. I don’t want to think about it. I don’t want to form a committee to study it for the next 18 months. Whatever the problem or challenge is, I want to get it dealt with today. I believe you’ve got to get up every day and wrestle the alligator that’s in front of you. And then move on to the next one.

There is a difference between a dream and a pipe dream. The difference is that a pipe dream isn’t real. What makes a dream real is that the person dreaming it knows how to take action and deal with the immediate problems, instead of sitting around waiting for someone else to deal with the problems or hoping they’ll change on their own.

Go get it done. Quit talking about what you’re going to do. Quit writing down what you’re going to do, and go do it. Get after it. Go make it happen now.

Nu Skin Enterprises Reports 28% Q2 Revenue Growth

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Nu Skin Enterprises, Inc. announced strong second-quarter financial results with revenue of $704.2 million, up 28 percent over the prior-year period, which was $550.1 million.

“We continue to successfully execute on our customer growth strategy centered on engaging platforms, enabling products and empowering programs, which led to accelerated growth,” said Ritch Wood, chief executive officer. “Our customers grew by 8 percent, and sales leaders grew by 21 percent, and we saw healthy revenue generation throughout the business, highlighted by double-digit increases in Mainland China, Southeast Asia and the Americas and Pacific. We are also pleased with the solid performance of our acquired businesses, which we anticipate will show increased benefits in our future results.”

Regionally, revenue results included:

  • Mainland China: $245.2 million, up 43 percent over 2017 ($170 million)
  • Americas/Pacific: $103.9 million, up 25 percent over 2017 ($82.9 million)
  • South Korea: $91.6 million, up 5 percent over 2017 ($86.9 million)
  • Southeast Asia: $79.2 million, up 31 percent over 2017 ($60.5 million)
  • Japan: $64.1 million, down 1 percent from 2017 ($64.7 million)
  • Hong Kong/Taiwan: $$52.2 million, up 21 percent over 2017 ($43.0 million)
  • EMEA: $44.0 million, up 15 percent over 2017 ($38.1 million)

Year to date, company revenues are $1.3 billion, up 26 percent from 2017’s $1.0 billion.

To read the full Nu Skin Q2 financial report, click here.

Medifast’s Second Quarter Revenue Increases 55%

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Owings Mills, Maryland-based Medifast, Inc. reported financial results for the second quarter ended June 30, 2018. Revenue was $117.3 million, an increase of 54.9 percent from revenue of $75.7 million for the second quarter of 2017. Active earning Coaches were 19,700, an increase of 45.9 percent year-over-year.

“We are pleased to report a further acceleration in the business momentum we reported in the first quarter of the year, resulting in record revenues and profitability that exceeded our expectations,” said Dan Chard, Medifast’s chief executive officer. “The accelerating growth rate is an indication of the energy behind our integrated coach model tied to our powerful mission and a repeatable business rhythm capable of delivering long-term sustainable growth. We are confident that we are well positioned for future growth and, based on these strong operational and financial results as well as our positive outlook for the remainder of the year, we are pleased to be able to raise our annual guidance once again this year.”

OPTAVIA-branded products represented 64 percent of consumable units sold for the second quarter of 2018 compared to 30 percent for the second quarter of last year. The average revenue per active earning Coach for the second quarter of 2018 increased 16.1 percent to $5,474 compared to $4,713 for the second quarter last year.

To read the full Medifast Q2 financial report, click here.

Q2 Net Sales Up 12% for Herbalife

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Los Angeles-based Herbalife Nutrition Ltd. Yesterday announced financial results for the second quarter ended June 30, 2018.

Net sales of $1.3 billion increased 12 percent compared to second quarter 2017. Volume points of 1.5 billion, the highest amount to be recorded in a quarter in company history, increased 12 percent compared to the prior year period, above the guidance range of 4.0 percent – 8.0 percent.

“Our top-line growth rate accelerated in the second quarter reflecting the strength of our business model to provide solutions to many of today’s global nutrition and wellness megatrends,” said Rich Goudis, CEO of Herbalife Nutrition.

Regionally, net sales were:

  • North America: $262.5 million, a 20.2 percent increase
  • EMEA: $260 million, a 15.7 percent increase
  • Asia-Pacific: $253 million, a 7.4 percent increase
  • Mexico: $118 million, a 2.2 percent increase
  • China: $286.8 million, an 18.2 percent increase
  • South & Central America: $105 million, a 4.5 percent decrease

To read the full Herbalife Q2 report, click here.

Avon Reports Q2 Revenue Down 3%

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London-based Avon Products, Inc. (NYSE: AVP) today announced its results for the quarter ended June 30, 2018.

Total revenue decreased 3 percent to $1.4 billion, or increased 1 percent in constant dollars, both including a benefit of approximately 4 percent due to the impact of adopting the new revenue recognition standard and both including an approximate 1 percent unfavorable impact from the Brazil truckers’ strike. Active Representatives declined 4 percent, driven by decreases in South Latin America, primarily Brazil, Europe, Middle East & Africa and North Latin America, or declined approximately 3 percent excluding the Brazil truckers’ strike.

“Entering my seventh month at Avon, I am encouraged by improved revenue growth in three of our top five markets and the promising trends we are seeing across the majority of the rest of our business,” said Avon CEO Jan Zijderveld. “This is underpinned by our improving service quality and operational efficiencies, and in turn reflected in our higher operating margin. However, we are not yet satisfied with the overall operating results of the quarter.”

Regionally, revenue results were:

  • Europe, Middle East & Africa: up 1 percent, or relatively unchanged in constant dollars, both including a benefit of approximately 3 percent due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives.
  • South Latin America: down 8 percent, or up 3 percent in constant dollars, both including a benefit of approximately 5 percent due to the impact of adopting the new revenue recognition standard.
  • North Latin America: relatively unchanged, or up 3 percent in constant dollars, both including a benefit of approximately 5 percent due to the impact of adopting the new revenue recognition standard
  • Asia Pacific: down 1 percent, or up 1 percent in constant dollars, both including a benefit of approximately 1percent due to the impact of adopting the new revenue recognition standard.

To read the full Avon Q2 report, click here.

Natural Health Trends Second Quarter Revenue Down 1%

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Natural Health Trends Corp. today announced financial results for the second quarter ended June 30, 2018.

Total revenue of $50.9 million decreased 1 percent compared to $51.5 million in the second quarter of 2017, and decreased 3 percent compared to $52.4 million in the first quarter of 2018.

“Our second quarter performance reflected a continuation of the momentum we established in the fourth quarter of 2017,” said Chris Sharng, president of Natural Health Trends. “The 3 percent sequential decline in quarterly revenue can be attributed to the timing of our promotional activities. Major incentive trips, such as those to Australia and Seattle, took our members out of the markets in the second quarter. However, the associated qualification periods concluded in prior quarters.”

Revenue from the company’s Hong Kong operations, which represented 88 percent of total revenue, was $44.6 million, a decrease of 2 percent compared to $45.7 million in the second quarter of 2017. Revenue outside of Hong Kong of $6.3 million increased 9 percent compared to $5.8 million in the second quarter of 2017.

The number of Active Members decreased 2 percent to 93,000 at June 30, 2018, compared to 95,040 at March 31, 2018, and decreased 13 percent compared to 107,290 at June 30, 2017.

For the year, total revenue of $103.3 million decreased 7 percent compared to $111.3 million in the first six months of 2017.

Young Living Foundation Raises $1 Million for Hope for Justice

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The D. Gary Young, Young Living Foundation raised more than $1 million to help end modern slavery in Africa during the Young Living Foundation’s Ride for a Reason, Foundation 5k, and other activities.

All funds raised will go to support Hope for Justice, a nonprofit that exists to bring about the end of modern slavery by preventing exploitation, rescuing victims, restoring lives and reforming society.

“Young Living’s compassionate members have generously given to help some of the most isolated and vulnerable communities around the world,” said Jared Turner, president and chief operating officer of Young Living Essential Oils. “I want to thank our members, Scott and Brenda Schuler, who chose to do something larger than themselves by launching the Ride for a Reason fundraising campaign that brought the Young Living family together and assisted in raising over $1 million to support Hope for Justice and help rescue the victims of human trafficking.”

Starting with Uganda, the Foundation will immediately fund three Hope for Justice Lighthouses, each of which will provide trauma care, medical services, education and vocational training, counselling, therapy and safe shelter to survivors from the day they are rescued from slavery to when they are reintegrated into a family centered environment. Each Lighthouse will provide 150 to 200 children who are victims of human trafficking with this type of restorative care and safety each year.

Nerium Appoints Brad Wayment, Mark Nicholls to Global Leadership Team

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Addison, Texas-based Nerium International yesterday announced the appointment of direct sales industry veterans Brad Wayment and Mark Nicholls to the executive team.

Mark Nicholls

Mark Nicholls

Brad Wayment

Brad Wayment

Wayment will be the company’s new president of Global Markets starting on August 24. He will oversee global strategy and direct all Nerium’s international operations throughout North America, Asia-Pacific, Latin America and Europe. Prior to Nerium, he worked in the direct selling industry for several companies in various executive roles.

Nicholls was named the company’s chief financial officer. He will direct the finance teams at Nerium’s global headquarters in the United States as well as Nerium offices around the world. Prior to Nerium, he served as CFO at publicly traded and private companies, leading global treasury departments and taxation functions.

Le-Vel Names Drew Hoffman New President

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Le-Vel, the direct seller of health and wellness products, yesterday announced that Drew Hoffman has been appointed president, effective immediately.

Hoffman, who began his career at Le-Vel in 2015 as executive vice president and chief legal officer, was promoted to chief operating officer and chief legal officer in 2016. He will continue to serve as chief legal officer in conjunction with this new role and will lead the company’s executive team while providing strategic direction for the daily business operations and long-range objectives of the firm.

“Drew is a seasoned and trusted leader who delivers consistent results,” said CEOs Jason Camper and Paul Gravette. “He has been an integral part of our success over the last few years. We have tremendous confidence in his ability to take Le-Vel to new heights of operational excellence.”

“Jason and Paul have built an outstanding company on the highest standards of integrity,” said Hoffman “I’m incredibly grateful and genuinely excited about the opportunity to help lead Le-Vel into the future. We have so much potential for growth, and I look forward to working with our entire leadership team and our most valued asset—our Thrivers around the world—to continue to build a truly global movement of health and wellness.”

Avon Announces Senior Management Appointments

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Avon Products, Inc., the London-based beauty company, today announced the appointments of a new vice president of investor relations and a new chief digital officer.

Amy Greene has been appointed vice president of investor relations, effective August 13. She brings two decades of experience as an industry analyst and as in-house investor relations executive, most recently leading investor relations and corporate engagement at another direct selling company. She also previously as vice president of investor relations & government relations at GNC Holdings Inc., the global vitamin and supplements retailer.

Benedetto Conversano has been appointed senior vice president and chief digital officer. In this newly created role, which will be effective September 3, he will succeed chief information officer Sue Liddie, who is retiring. Conversano most recently served as chief global information officer at Jeronimo Martins, a €16 billion revenue international food, health and beauty retailer.

Heather Payne has been appointed chief technology officer, reporting into Benedetto. She previously served as chief technology officer for DMG Media (Daily Mail Group), an international multi-channel media company, where she oversaw IT changes across all functions of the business, including completing the transformation of technology and change process and co-creating the innovation strategy for the business.

Last week, Avon announced a series of senior appointments for its global brand marketing.

Anna Chokina has been appointed vice president of Global Brand Marketing, Skincare and Personal Care, a $1.6 billion category, effective September 24. She joins Avon from L’Oreal Paris, where as general manager, Russia, she led the business to consecutive years of growth.

Lena Degtyareva will assume the position of vice president, Global Fashion and Home, a $1.4 billion category. She will be responsible for growing Avon’s fashion and home business, which currently delivers a quarter of Avon’s global revenue.

Marco Brandolini has been appointed vice president and general manager, Italy and the Mediterranean, effective September 1. He most recently served as EMEA vice president of Sales & Marketing, Member Services and Technology for another direct selling company.