June 21, 2018

Changes in Sales Tax Laws for U.S. States

By Paul Graney, State & Local Tax Leader

Changes in Sales Tax Laws for U.S. States State & Local Tax

The United States Supreme Court today rendered its decision in South Dakota v. Wayfair, Inc., a seminal case that will have a profound effect on sales taxation in all 50 U.S. states.

SUMMARY

The Court decided the case in favor of South Dakota.

The case centered on when a business is required to collect and remit sales tax in the state of a purchaser and whether sales alone create “nexus” (the ability of a state to subject a business to its taxes).

The State of South Dakota enacted a law whereby an entity with a minimum of $100,000 in sales, or 200 individual transactions, in the state is required to collect South Dakota’s sales tax. This law was in direct contradiction of a 1992 Supreme Court case (Quill Corp. v. North Dakota) which required an entity to have “physical nexus” in order to have a sales tax collection requirement. Physical nexus meant that an employee or other property of the company had to be physically present in the state.

The South Dakota law required only that sales within the state exceed $100,000 over the course of a year for the seller to become subject to the sales tax collection requirement.

As a result of this decision, there will be a dramatic shift in how sales tax is applied across the country, as a number of states have enacted similar laws. Retailers transacting business may now be required to collect and remit sales tax in any state, whether or not they have physical nexus in that state.

The Marcum LLP State and Local Tax Department will provide a more detailed analysis once a thorough review of the decision has been completed.

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Paul J. Graney

Paul J. Graney

State & Local Tax Leader

  • Tax & Business
  • Boston, MA