In June 2018, the US Supreme Court issued its ruling on South Dakota vs Wayfair Inc., et al. The state of South Dakota brought this challenge to the courts. Its contention was the law requiring a business to be physically present in the state to collect taxes was unfair. Therefore, the state claimed that it put their business people at a disadvantage by having to collect sales tax. The state crafted a law that would mandate that business not in the state to collect sales tax, provided they hit certain thresholds. The Supreme Court sided with the state saying that businesses that hit the thresholds defined must collect sales tax.
What does this mean for online and out of state retailers?
This decision lays the foundation for state to rewrite their tax code. South Dakota is currently the only state with the appropriate laws on the books, while others currently have pending legislation. The business world doesn’t yet know the impact of this change, but they are watching closely.
Are states allowed to collect sales tax now on all sales?
This ruling does not allow the states to simply flip the switch and collect taxes. They must first go through the hoops of defining what the parameters are to collect. Those states with sales tax are likely to enact legislation allowing them to collect. The states might struggle with ensuring it will hold up to legal challenges. This could be a lengthy process of sorting out and understanding the impact on businesses.
Next steps for online and out of state business.
It is impossible to know when and how individual states are going to react to this decision. But it is almost a certainty that they will act quickly. Because it is difficult for states to ignore a new revenue stream. If you are unsure if you are affected, reach out to us and we can help you out. After all, you are in business to do what you do best. Let us help you with the continued changes in tax codes. Contact us today!
