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What does the Supreme Court Sales Tax Ruling Mean for eCommerce Businesses?

With last month’s Supreme Court landmark ruling on South Dakota vs. Wayfair, there are new tax implications for online businesses transacting with consumers or B2B buyers in states even if they have no physical presence.

 

This new ruling by SCOTUS stated that Wayfair, an eCommerce retailer, is now required to collect and pay taxes in South Dakota despite having no physical presence, otherwise known as nexus, in that state.

 

Under the new ruling, any business that has more than $100,000 in sales or 200 or more transactions within South Dakota, that business is obligated to collect and pay the state 4.5% of those purchases.

 

So, what does this mean if you’re a catalog retailer or an online business with customers in multiple states? The answer right now is a bit muddy as each state will likely set their own sales tax thresholds and guidance.

 

According to the sales tax experts at Avalara, there are some states to keep a close eye on right away:

 

“These are states with economic nexus, non-collecting seller use tax reporting, marketplace sales taxes, and cookie (software) nexus. States with affiliate and click-through nexus should also be monitored.”

 

Avalara lists the states to be more aware of in this recently updated post on their site here.

 

According to Digital Commerce 360, “South Dakota is one of 24 states that are members of the Streamlined Sales and Use Tax Agreement, which has devised common tax-collection policies designed to make it easier for merchants to collect sales tax in those states.”

 

More than likely, it’s safe to assume that most states won’t go too long without making a statement or providing guidance since the moment they do so, businesses could be liable for collecting and paying taxes for that respective state going forward.  Also, to be clear, there are 45 states that bear a sales tax.

 

Every minute and day that states wait to offer up guidance, that’s income lost that can’t be recovered, so it’s likely most state tax governing bodies won’t wait too long to address this revenue generator.

 

Given that states will likely have different reporting requirements, annual revenue thresholds and variances on which products can be claimed as tax-exempt, selling companies would be wise to find a local tax lawyer to help them navigate this finance challenge.

 

Or, you can go the route that Wayfair and other companies have by proactively collecting and applying a sales tax.  Wayfair, for example, has publicly supported that online companies should pay sales taxes to states and “already collects sales tax in 22 states,” according to research by Internet Retailer.

 

By proactively collecting sales taxes, this will help selling companies beat the deadline and have them well prepared in advance to address year-end reporting requirements and tax filings.

 

If you’re interested into digging in to learn more about sales taxes for online businesses, you can start by visiting the Streamlined Sales Tax Organization or check out this multi-resource sales tax microsite by Avalara.  

 

Be aware that if you do use software to help you calculate, file and remit taxes, it should be a Certified Service Provider (CSP), according to the SSTO.

 

If you’re already overwhelmed with the idea of where to start and you currently sell into multiple states, it’s probably time to hire a tax lawyer to help you comply and keep up with the changes that will likely come fast and furiously this year.


If you’d like to learn more about how Systum’s tax partners, Avalara and Tax Cloud, can help you automate your sales tax collection and reporting, schedule a time with us by filling out the form below. 

 

Request a quick conversation with one of our representatives:

 

Categories: eCommerce

Tags: ecommerce, tax

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