Do You Sell Online? New Supreme Court Ruling May Affect You
If you sell online, you may now be required to start collecting sales tax for online purchases, regardless of whether you have an established physical presence in that state, according to a new U.S. Supreme Court ruling. The U.S. Supreme Court ruled June 21, 2018, that state and local governments are allowed to require remote sellers to register and collect sales tax. In the past, remote sellers only had to collect sales tax if they had an established physical presence in the buyer’s state.
South Dakota enacted a law requiring the collection of sales and use tax in the state if the seller currently or in the previous year meets either of the following criteria:
-The seller’s gross revenue from the sale of tangible personal property, any product transferred electronically, or services delivered into South Dakota exceeds $100,000; or
-The seller sold tangible personal property, any product transferred electronically, or services for delivery into South Dakota in 200 or more separate transactions.
Other states enacted similar legislation taking South Dakota’s lead. South Dakota v. Wayfair, Inc. was brought against the state of South Dakota by internet sellers, arguing that the new law violated an 1992 U.S. Supreme Court ruling. The court ruled in favor of the state. But what does this mean for internet sellers, and how will businesses be affected by this new ruling?
Many questions will need to be answered, such as how is “remote seller” defined? What is a “transaction?” Will it still apply if you sell less than 200 transactions or do not exceed the dollar threshold in the South Dakota law?
Many states already require the collection of sales tax on online purchases, but it is likely that this new ruling will spur other states to revise their laws and require sales tax collections as well.
If your business sells products or services out-of-state, you should obtain and review your sales by state, software capabilities and processes to ensure compliance with current and potential new legislation that could be enacted.