On June 21, 2018, the United States Supreme Court issued a significant ruling that impacts online retailers regarding online sales taxation. In South Dakota v. Wayfair, the Court overruled prior Supreme Court rulings that prevented states from collecting sales tax from retailers that didn’t have a physical presence within their state. The Court ruled that South Dakota could impose sales taxes on out-of-state sellers with no physical presence in their state. The Court found that South Dakota’s sales tax on sellers with sales of $100,000 of goods and services annually or 200 or more separate transactions of goods and services to South Dakota was constitutional and therefore the state could impose sales and use taxes on remote sellers so long as there is a sufficient connection between the taxpayer and the state.
This decision is not retroactive and is limited by individual state law requirements on collecting sales taxes on remote sellers. It is doubtful Congress will weigh in on this decision and it is anticipated that some states will amend their Tax codes to allow for taxation of online sales in line with this decision. As a business owner, if you currently sell items online and across state lines and do not pay sales taxes; then you should check sales tax requirements in each of these states to determine whether or not you are required to pay sales taxes. Equinox will continue to monitor this topic provide updates as it evolves.