Supreme Court Rules in Favor of State in Wayfair v. South Dakota

2018-06-22T13:35:24+00:00

Do you shop online? Get ready to pay a little more. The U.S. Supreme Court has ruled that a state can make retailers charge and submit taxes on goods they sell into that state, even if they do not have a physical presence in it. In Wayfair v. South Dakota, the Court concluded that the “sales tax nexus” previously articulated by the Court in Quill v. North Dakota is “unsound and incorrect.” That ruling held that a state cannot require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers there.

What it means for out-of-state retailers is that sales tax nexus is no longer solely based on a physical presence standard. Out-of-state sellers that meet minimum standards can be required to charge, collect and remit sales tax. Each state sets its own standards. In South Dakota, the minimum standards are $100,000 in sales or more than 200 transactions over a 12-month period.

The winners are local brick and mortar businesses, which will be able to compete pricewise with online retail giants. States and municipalities stand to gain billions of dollars in annual revenue. The losers are small online retailers who could be devastated by new compliance costs.

HBK's Tax Advisory Group (TAG) will provide updates about the decision as they become available.

About the Author(s)

Shane directs HBK CPAs & Consultants State and Local Tax (“SALT”) Practice. He is a member of the firm’s Tax Advisory Group based in the Mid-Atlantic Region. Shane has a decade of experience with SALT consulting, controversy and compliance services. He is an experienced SALT consultant, having worked at Big 4 accounting firms and performed services to Fortune 500 companies in the Greater New York City, Philadelphia and Pittsburgh areas. Shane is a member of the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. He can be reached via email at sfinn@hbkcpa.com

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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