Back in 1992, when less than 2% of Americans had access to the Internet, the Supreme Court held that if a business didn’t have a physical presence in a state, that business didn’t need to collect and remit sales and use tax for that state for products they sell online (Quill Corp v. North Dakota).
Based on a survey from the Pew Research Center, in 2018, 89% of Americans used the internet (90% based on the most recent data in 2019). With the growth of e‐commerce, many states claimed they were losing sales tax revenue. South Dakota enacted a law that required certain out‐of‐state sellers to pay sales taxes in their state if those sellers exceeded a certain threshold. South Dakota then filed suit in state court to grant that their law was valid and applicable to certain online sellers. This suit was taken all the way to the US Supreme Court.
As a result of this case, on June 21, 2018, the US Supreme court issued a landmark decision (Wayfair v. South Dakota) allowing that a state can require an out‐of‐state seller to collect sales and use tax on sales within that state, without the seller having a physical presence there.
Could Your Business be Impacted?
This decision has impacted and is expected to continue impacting many businesses that sell online or in multiple states (especially with the change in our world this past year due to COVID-19). It’s important that your business review these requirements.
What should your business do if it meets any of the state requirements? Here are some options:
- Register your business and pay state sales tax in those states that have already enacted sales tax laws – Many states have enacted legislation in response to the Wayfair decision and other states may enact regulations in the near future.
- Volunteer to register and pay sales tax everywhere – Bite the bullet and register in all states to ensure compliance once further state guidance is issued.
The Anderson ZurMuehlen team is pleased to be a resource for you. Please contact us with any questions or to review your state requirements!
This article was written by Kiely Thoen, a CPA and Shareholder located in our Butte office.