The US Supreme Court just handed down their decision on the Wayfair case. This case sets a precedence for major changes in sales & use tax filing requirements by retailers. Based on several previous court decisions, retailers had to have physical presence (employees or other agents, property owned or leased in the state, or other factors) in a state to be required to register and collect that state sales tax. This decision reverses the time-honored standard. States are now free to levy taxes on sales of goods and services regardless of whether the seller has physical presence in the state.
While the door is open for states to require sellers without physical presence to collect and pay sales taxes, it does not mean a free rein for a state to subject any or all interstate commerce to state sales taxes. It appears the expectation should be that states will immediately amend their sales tax statutes to allow for the levy of taxes on sellers without a physical presence in the state, subject to the requirements established by this Court decision.
South Dakota’s has a remote seller law in place. Since South Dakota has no income tax, it relies heavily on sales taxes for its General Fund so their law requires out-of-state retailers to collect South Dakota sales tax if the retailer:
- had annual gross revenue of more than $100,000 from sales in South Dakota; or
- completed more than 200 sales annually in South Dakota.
How does it affect my business?
While the court established that the physical presence requirement was no longer a “clear and easy” rule to apply, it may have established a new, less clear rule for establishing the requirement to register and file. What about sales into South Dakota with less than $100,000 in sales or only 175 transactions? There will definitely be more to come on topic but the majority believes that ALL businesses will likely need to implement or modify their sales tax policies and procedures to accommodate new state laws.
How can Wegner CPAs help?
We are ready to consult with all businesses to proficiently determine next steps for you. Please reach out to your Wegner professional team member or directly to Cam Brawley, Director of State and Local Tax Services.
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About the Author
Cam Brawley, CPA is the Director of SALT Services at Wegner CPAs. Cam specializes in multistate income, sales & use, property taxes, and unclaimed property. He has experience with large and small businesses with extensive expertise in manufacturing, supply chain, retail/wholesale and technology companies.