The U.S. Supreme Court has issued its highly anticipated decision in South Dakota v. Wayfair, overruling Quill’s decades old physical presence sales tax nexus standard. This decision will have significant implications for almost all industries, but especially consumer products (retailers) and industrial products. This case dealt with whether a state has the authority to require Internet sellers to collect and remit to the state of South Dakota retail sales taxes on purchases shipped into South Dakota by Wayfair, a large home items seller. Wayfair had no offices or staff in the state, but was still held liable for collecting sales taxes.
With a new sales tax nexus standard established, more states will require all retailers that sell within their borders to collect that state’s sales tax. About a dozen states have already addressed economic nexus laws or regulations. This case may have even broader repercussions, as states re-write laws. If you make sales into states not via the Internet, but over the phone or with written orders, this case may ultimately require you to collect local sales or use taxes on those non-Internet sales. Worse yet, the Nexus for sales tax collections may also someday apply to subject you to income taxes on those sales.
This Wayfair case has created many more questions than answers. Adapting your business to the new sales and use tax landscape will take time, even though you may need to react quickly.
To learn more and to discuss how Wayfair affects your business, please read RSM’s alert, U.S. Supreme Court kills Quill physical presence and contact the partner on your engagement.