Earlier today, the Supreme Court of the United States released its highly anticipated decision on South Dakota v. Wayfair. The court upheld South Dakota’s ability to collect and remit sales tax from online retailers that do not have a physical presence in the state. The decision effectively reverses the ‘physical test’ precedent set in Quill Corp. v. North Dakota (1992), which prevented states from collecting sales tax from companies unless that company has a physical presence in the state. As a result, online retailers are now required to collect and remit sales tax to the state, or the state can collect sales tax from the consumer.
This decision will impact businesses that sell goods online to customers in a state where they do not have physical presence. These businesses will now be responsible for collecting and remitting sales tax to that state. Although South Dakota limits the law’s applicability to retailers with a certain number of transactions or sales, the requirements for some companies could be significant. As other states start developing similar sales tax laws, businesses with interstate online sales will need to be aware of changing regulations and the resulting increase in tax compliance.
- John Bateman, Tax Specialist