On June 26, 2018, the Supreme Court ruled in South Dakota v. Wayfair, in favor of South Dakota’s suit against Wayfair, Overstock.com and Newegg.com requiring them to pay sales tax to the state.
So does this mean anything for you, the retailer?
For one, it levels the playing field in favor of brick and mortar companies who have been at a severe disadvantage to purely ecommerce companies who have not had to collect sales tax for a majority of their sales.
But if you also sell online, then it may impact you in a different way as well.
In quick summary, this ruling opens up the right for any state to enforce their own laws for collecting sales tax from online sellers. While it’s too early to know how this will play out exactly, or whether there will ever be a federal tax law in place to make it easier on merchants, here is what it means for you now.
Before South Dakota v. Wayfair, you had to pay sales tax in any state that you had a “nexus” in – meaning you either had a physical presence (like an office, warehouse or employees) in that state.
After South Dakota v. Wayfair, the Supreme Court removed the “physical presence” requirement and now refer to it as a “substantial nexus” – which the Supreme Court defined as a company that uses or takes advantage of the substantial privilege of carrying on business in a state.
An unsurprisingly muddy definition by the Court.
So what does that mean, exactly? Do you now have to file sales taxes for orders placed in Alabama, Montana, California, etc. or not?
Well…for now, it depends on the state.
Here are the current nexus requirements that are in place around the U.S.
- Alabama – $250,000 or more in sales in a year.
- Arizona – $100,000 or more in sales in a year.
- Georgia – Effective Jan. 2019 – $250,000 or more in sales in a year or 200 or more separate transactions in a year.
- Hawaii – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Indiana – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Illinois – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Kentucky – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Louisiana – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Maine – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Massachusetts – 100 or more separate transactions that generate $500,000 or more in sales in a year.
- Mississippi – $250,000 or more in sales in a year.
- Rhode Island – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- South Dakota – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Tennessee – $500,000 or more in sales in the prior 12 months. Note that Tennessee’s nexus law still has to be approved by the legislature.
- Vermont – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
- Washington – $10,000 or more in sales in the prior 12 months. (B&O Tax is $285,000 or more in 2018).
- Wyoming – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
If you meet any of those for your online sales, then you are required to collect and file sales tax.
We’ll keep you up to date on any changes made by the ruling and future tax laws. Stay in the loop by joining our newsletter here.
