There has been a lot of buzz in the past few months regarding the South Dakota vs. Wayfair, Inc. case. It’s important because state and local governments cannot enforce their sales tax laws on internet retail sales unless the retailer has a local physical presence. This is a precedent that was established in U.S. Court cases dating back to 1967 and 1992.
South Dakota challenged this precedent and took their case to the U.S. Supreme Court. The decision handed down by the Court in June 2018 does impact sales tax collection and remittance for online retailers. Remember, this decision is for South Dakota, but every state has been watching and aligning their laws/policies with that of South Dakota. Basically, this decision makes it possible for state and local governments to require online retailers to collect and remit sales taxes based on the location of the customer. For the past two decades, retailers were only required to collect and remit sales taxes if they had a physical presence within a state or local government.
Other state and local governments must work on their economic nexus laws and simplify the tax code to take advantage of this decision. Read more about this case in our other articles Paying online sales tax is a good thing. Really! and A momentous court decision regarding sales tax. You can also read the court case here.
Marilyn Mays, CPA, CGMA