South Dakota vs. Wayfair was decided June 21, 2018, and has significant implications for the imposition of sales tax on remote sellers. A few members of the FICPA State Tax Committee, including Kaufman Rossin Tax Principal Kenneth Rios, J.D., answered questions in Florida CPA Today on the impact of the decision. The following are Ken’s insights.
Does the Wayfair decision mean that businesses should start collecting sales tax on taxable sales tax to purchases in every state starting June 21, 2018?
Not necessarily. Although the Supreme Court upheld South Dakota’s sales tax law, currently not all states have similar economic nexus sales tax registration and filing requirements. Approximately 12 states had similar laws to South Dakota’s but delayed enforcing them until the Wayfair case was decided and another five or so had similar laws on their books that were to take effect beginning on or after July 1, 2019.
Following the Wayfair decision, a couple of states, notably New Jersey, convened special legislative sessions to approve bills adopting economic nexus provisions similar to South Dakota’s. Other states are currently reviewing the Court’s ruling to consider what action to take; while others have already begun considering draft bills submitted by state legislators for the upcoming legislative session (e.g., California).
In any event, it is advisable for businesses that are making sales into a state where they lack physical presence (“remote sellers”), not just online retailers, to review their sales reports and identify the states in which they have sales that exceed the economic nexus thresholds of the various jurisdictions with economic nexus provisions. As of now, the lowest threshold in states with a remote seller type law is $10,000 of in-state sales (e.g., Minnesota and Pennsylvania) with the remaining states having a threshold of $100,000 or more.
The majority of the states with remote seller laws require the registration and collection of sales tax if the seller’s gross revenue from the sales in the previous calendar year or current calendar year exceeds the economic nexus thresholds. So until that threshold is met or exceeded, registering for sales tax in a given state is not mandatory, but activities and sales should be closely monitored.