Collecting Sales Tax

On June 21, 2018 in South Dakota v. Wayfair, Inc. the U.S. Supreme struck down the physical presence standard to create state sales tax nexus and instead, established economic nexus as the new standard.  Physical presence is no longer the nexus standard when evaluating whether or not a company should collect and remit sales tax to a specific state.

Currently, more than 20 states have enacted similar legislation and more states are expected to follow. Under these laws, remote sellers are required to collect sales tax (or comply with use tax notification requirements) in a state if their business, measured by either sales volume and/or the number of sales transactions, exceeds certain minimum thresholds. The precise thresholds and effective dates of these laws vary from state to state. Further adding to the compliance complexity, many states have enacted and other states are likely to enact economic nexus standards for state income tax, not just sales/use tax.

The Wayfair decision may require you to register, collect and remit sales tax in additional states, or to modify your notifications to online purchasers regarding use tax reporting obligations. Your computer software applications might be updated to comply with these obligations, but you may need to use third parties to modify their online sales platform.

We recommend that you engage a qualified professional or tax attorney to further investigate the relevant issues.

Posted in IRS