I WAS JUST THINKIN'...
In This Section

What the Supreme Court Wayfair decision means for Sales and Use Tax; CPAs


Jul 10, 2018

The U.S. Supreme Court recently issued a decision that significantly changes the Sales and Use Tax collection requirements for online retailers and out-of-state sellers.

Its decision in South Dakota v. Wayfair ruled that a substantial economic presence is all that is required for sales tax nexus under the Commerce Clause of the United States Constitution. If a company has sales tax nexus in a state, they are required to collect Sales or Use Tax on sales to customers in that state if the state has a Sales or Use Tax.


Prior to this decision, a substantial physical presence in a state was required to have sales tax nexus under the Commerce Clause. The physical presence standard was established with two Supreme Court cases: National Bellas Hess v. Department of Revenue of Illinois and Quill Corp. v. North Dakota. Under the physical presence standard, a seller had to have property, personnel or some other physical connection with a state to be required to collect and remit sales tax.   


The Wayfair decision left a number of questions unanswered by remanding several issues to the South Dakota courts to rule. What appears to be clear is they believe the minimum thresholds in the South Dakota statutes for substantial economic nexus were sufficiently high enough. The minimum thresholds for substantial economic presence under the South Dakota statute is annual sales of $100,000 or 200 separate transactions.


A number of states have a similar minimum threshold in their substantial economic presence statutes. The current standard that states are moving to for Sales and Use Tax is a substantial economic nexus standard based on safe harbor and the levels of sales or number of transactions. South Dakota’s law, for example, limits imposition of a Sales or Use Tax collection responsibility to those taxpayers selling into the state who have $100,000 of gross receipts attributable to customers located in the state or 200 total sales transactions into the state over a twelve-month period. 


Forty-five states currently impose a Sales Tax and/or Use Tax. Currently, 23 of the 45 states have statutes with nexus created by substantial economic presence. Companies meeting or exceeding the substantial economic nexus threshold established by a state are required to collect Sales Tax or Use Tax. Many of the 23 states have statutes similar to the South Dakota economic nexus provisions that were upheld by the Supreme Court in their Wayfair decision.


The effective date for economic nexus statutes in the 23 states phase in at various dates over the next six months. Four of the 23 states have very low economic nexus thresholds, but allow the online retailer to comply with onerous reporting responsibilities in lieu of registering and collecting sales tax. 


We expect many of the states that do not have economic nexus statutes will pass legislation in the coming months. New Jersey currently has an economic nexus statute awaiting the Governor’s signature.


In determining the impact of the Wayfair decision and the introduction of the substantial economic presence nexus standard for sales tax, there are a number of potential issues to be considered:

  • Determine states in which the company has a Sales Tax or Use Tax collection responsibility based on each states’ substantial economic presence thresholds.
  • Determine the states the company should begin collecting Sales Tax or Use Tax on its sales. When collecting Sales Tax or Use Tax, the customer remits the tax to the selling company.The selling company then remits the tax to the appropriate state. If no tax is collected and the company is subsequently audited by a state, the Sales Tax or Use Tax is the responsibility of the company and it can be very difficult to subsequently collect the tax from the customer.
  • Most states ask a series of questions when registering to do business or for sales tax. Two of the questions ask when the company began doing business in the state and the date of the first sale. The questions are often used to generate nexus questionnaires for sales tax or income tax.
    • In states for which Sales Tax or Use Tax has not been collected based on the company having no physical presence in the state, review past practices to confirm there was no physical presence. This is especially important for companies selling their products in an online marketplace (i.e. Amazon, etc.) where they do not control where their inventory is held.
      • Based on the analysis, determine any exposure that may exist for uncollected sales tax.
    • In states for which income tax returns have not been filed based on the company having no taxable presence in the state, review past practices to confirm there was no income tax nexus. This is especially important for companies selling their products in an online marketplace (i.e. Amazon, etc.) where they do not control where their inventory is held.
      • Based on the analysis, determine any exposure that may exist for income tax.
  • There are a number of software alternatives to assist with the collection and remittance of collected Sales Tax or Use Tax. Most programs also provide for the preparation of the required state Sales and Use Tax returns.


The world of Sales and Use Tax has changed significantly with the Wayfair Supreme Court decision.  Companies will need to evaluate their Sales and Use Tax collection responsibilities and appropriate next steps.



17 comments

Leave a comment
  1. Alina Ahuza | Jul 19, 2018

    I adored the data in your web journals. These are extremely magnificent. You have made the extremely tasteful portrayal of your posts. Cheers for your amazing work. All the points of interest are in this post is marvelous.

    Best Escorts in Delhi   Sexy Housewife in Delhi   Escort Services Delhi   Sexy bhabhi in Delhi   Housewife Escorts in Delhi   Independent Escorts in Delhi   Independent Escort Girls in Delhi   New Delhi Escort Services   Escort Service in Five Start Hotel   Five Star Escort Service   Delhi Sexy Bhabhi   Escort Service in South Delhi   Delhi Sexy Models   Call Girls Number   Delhi Luxury Escorts   VIP Escorts in Delhi   Delhi VIP Escorts   Russian Escort Agency in Delhi   Sexy Housewife in Delhi NCR   Housewife Escorts in Delhi   Cheap Model Escorts in Delhi   Hot Model Escort in Delhi   Delhi Model Escort   Delhi High Class Escorts   Delhi Model Escort Service   Delhi High Class Escorts   Call Girls    Best Escorts in Delhi   Sexy Housewife in Delhi   Escort Services Delhi   Sexy bhabhi in Delhi   Housewife Escorts in Delhi   Independent Escorts in Delhi   Independent Escort Girls in Delhi   New Delhi Escort Services   Escort Service in Five Start Hotel   Five Star Escort Service   Delhi Sexy Bhabhi   Escort Service in South Delhi   Delhi Sexy Models   Call Girls Number   Delhi Luxury Escorts   VIP Escorts in Delhi   Delhi VIP Escorts   Russian Escort Agency in Delhi   Sexy Housewife in Delhi NCR   Housewife Escorts in Delhi   Cheap Model Escorts in Delhi   Hot Model Escort in Delhi   Delhi Model Escort   Delhi High Class Escorts   Delhi Model Escort Service   Delhi High Class Escorts   Call Girls    Delhi Escorts   Escorts in Delhi   Delhi Call Girls   Delhi Escort   Delhi Escorts Agency   Delhi Escorts Service   Call Girls in Delhi   Escort Delhi   Delhi Call Girls Service   Delhi Call Girls Photos   Delhi Escorts Girls Pics   Sexy Call Girls Pics   Sexy Girls Photos   Sexy Call Girls Numbers   Escort Service in Delhi   Russian Call Girls Service in Delhi

  2. Benefits of Sunflower Seeds | Jul 18, 2018
    I quite like reading an article that can make people think. Also, thanks for allowing for me to comment! Benefits of Sunflower Seeds
  3. Start Potty Training | Jul 18, 2018
    I recently found many useful information in your website especially this blog page. Among the lots of comments on your articles. Thanks for sharing.Start Potty Training
  4. Brain Foods | Jul 17, 2018
    I am hoping the same best effort from you in the future as well. In fact your creative writing skills has inspired me.Brain Foods
  5. Pumpkin | Jul 17, 2018
    I need to to thank you for this very good read!! I definitely loved every little bit of it. I have you bookmarked to check out new things you post…Pumpkin
  6. Pineapple Juice | Jul 17, 2018
    I recently found many useful information in your website especially this blog page. Among the lots of comments on your articles. Thanks for sharing.Pineapple Juice
  7. Pineapple Juice | Jul 17, 2018
    I recently found many useful information in your website especially this blog page. Among the lots of comments on your articles. Thanks for sharing.Pineapple Juice
  8. Corn | Jul 17, 2018
    Very interesting blog. Alot of blogs I see these days don't really provide anything that I'm interested in, but I'm most definately interested in this one. Just thought that I would post and let you know. Corn
  9. Children Learning Reading | Jul 16, 2018
    Hello! I just wish to give an enormous thumbs up for the nice info you've got right here on this post. I will probably be coming back to your weblog for more soon!Children Learning Reading
  10. Ex Factor Guide | Jul 16, 2018
    Nice knowledge gaining article. This post is really the best on this valuable topic. Ex Factor Guide
  11. Pregnancy Miracle | Jul 16, 2018
    Thanks for providing recent updates regarding the concern, I look forward to read more.Pregnancy Miracle
  12. The Magic of Making Up | Jul 15, 2018
    It proved to be Very helpful to me and I am sure to all the commentators here!The Magic of Making Up
  13. The Woman Men Adore | Jul 15, 2018
    Hello! I just wish to give an enormous thumbs up for the nice info you've got right here on this post. I will probably be coming back to your weblog for more soon!The Woman Men Adore
  14. Hero Instinct | Jul 15, 2018
    I am overwhelmed by your post with such a nice topic. Usually I visit your blogs and get updated through the information you include but today’s blog would be the most appreciable. Well done! Hero Instinct
  15. Coconut Oil | Jul 15, 2018
    Well we really like to visit this site, many useful information we can get here. Coconut Oil
  16. claraalbert | Jul 14, 2018
    Tthe issue, of direction, is whether online <a href='https://www.assignmentcamp.co.uk/'>assignment writing</a> outlets have to acquire income (or use) tax for online purchases. we all realize how this works at brick-and-mortar stores: on your sales receipt, kingdom (and perhaps neighborhood) income tax is brought to your invoice, collected through the service provider, and the service provider subsequently can pay that over to the kingdom.
  17. Jack | Jul 13, 2018

    This is very interesting, I like it. I will always come to visit after. I will recommend to friends too. Keep up the magnificent work. I think this is engaging and eye-opening material. Thank you so much for caring about your content and your readers. Custom essay writing service

     

    Leave a comment

    Paul Roth
    About the Author

    Paul Roth, CPA
    Tax Principal and co-leader firmwide State and Local Tax
    Blue & Co.