Current Events

Sales & Use Tax (Wayfair, Inc. vs. South Dakota)

In July 2018, the U.S. Supreme Court issued one of the biggest tax cases in decades.  Wayfair, Inc. v. South Dakota dramatically expands the ability of states to require out-of-state businesses selling to customers (within the taxing state) to collect and remit sales and use taxes.  This change has a huge impact on anyone selling items or services over the internet.

If you are selling items to customers in other states, then it is important to set up systems to track what sales are being made where, and whether you might be required to register in any other state due to the expanding filing requirements. Being aware of these changes can prevent you from being subjected to numerous fines and penalties.

Prior to the U.S. Supreme Court’s decision in Wayfair, Inc. v. South Dakota, a state could only require a business to collect sales or use taxes from customers if the business had some type of physical presence in the state, usually by owning, leasing, or storing property in the state or having an employee or agent in the state. 

Now states can require out-of-state sellers to collect and remit sales and use taxes if they make a minimum number of sales to customers in their state (in terms of dollars and/or transactions), even if they have no physical presence in the state.

This is a very large revenue maker for the states and, not surprisingly, states are changing their requirements for out-of-state sellers on an almost daily basis.  To complicate matters even further, each state and each local taxing jurisdiction may have different rules.

Most small retailers making only a few sales into a state will not be impacted since states are providing exceptions for businesses only making a minimum level of sales (e.g., less than $100,000 in annual gross revenues and/or less than 200 annual transactions).  However, each state can set its own sales thresholds.  For example, California’s threshold is $500,000 in sales to California customers (from out-of-state vendors), with no threshold based on the number of sales.

If there are any states in which you have had substantial sales, please contact Jacquelyn Shaw at Jacquelyn@StreitfeldAccounting.com to ensure you are complying with that state’s specific requirements.