Vrakas CPAs, Here Are Your Articles for Wednesday, October 24, 2018
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Impact of the Wayfair Decision



On June 21, 2018, the Supreme Court issued an opinion on South Dakota v. Wayfair, Inc. The Court ruled in favor of South Dakota against Wayfair and other large online retailers and overruled the Quill ruling from 1992.

The case involved economic nexus law that imposes sales tax collection and remittance duties on out-of-state sellers meeting gross sales and transaction volume thresholds.  In overturning its prior precedents, the court determined that physical presence is not required to meet the substantial nexus requirement.  The court held that Wayfair had established substantial nexus through “extensive virtual presence”.


Issues and Impact

The decision opens the door for states to enact laws that require out-of-state sellers to register, collect and remit sales and use tax regardless of whether they have physical presence in the tax jurisdiction. States have been acting quickly to amend their sales tax statutes to reflect the ruling, thereby, beginning to levy sales and use tax on any interstate commerce that has substantial nexus.

For most states enacting legislation, substantial nexus is based entirely on sales revenue, transaction volume, or a combination of both (rather than the old standard requiring physical presence in a state).  Out-of-state companies may now be required to register, collect and remit taxes in numerous states where they had not been registered in the past.


Planning and Action Required

 A majority of states have amended their sales and use nexus rules to reflect the new substantial nexus standard. The states adopting the new substantial nexus standard have defined substantial nexus based on varying sales and transaction volume thresholds with some threshold triggering nexus at $100,000 in sales or 100 or more transactions in the state during the year.

If the company’s sales or transaction volumes exceed the new substantial thresholds in any of the states that amended their nexus requirements, the company may have a new sales and use tax filing requirement in that state. CLICK HERE for a chart indicating the states that have amended their sales and use nexus standards to align with the Supreme Court ruling.

If you have questions regarding the Wayfair decision and new sales tax collection and remittance requirements for your business, please feel free to contact us.

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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