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South Dakota vs. Wayfair, Inc: What Does It Mean For Your Business?

July 28, 2018

 

On June 21st, 2018, the United States Supreme Court delivered it's ruling on South Dakota vs. Wayfair, Inc . Ruling in favor of South Dakota, the court effectively overturned  the 1992 "Quill Corp vs. North Dakota" case which held that states could not collect sales tax from sellers who did not have a physical presence in their state, a ruling that many have said allowed the e-commerce space to grow rapidly through the 1990s and 2000s. 

 

The majority opinion, written by Justice Anthony Kennedy, states "“The Internet’s prevalence and power have changed the dynamics of the national economy, The expansion of e-commerce has also increased the revenue shortfall faced by States seeking to collect their sales and use taxes.” 

 

So what does this mean for you and your business?

 

While this ruling currently only applies to sales to customers in South Dakota, more states are expected to follow suit and implement these changes as well. Illinois has already introduced similar legislation that will go into effect in October 2018.

 

Effectively, the physical "nexus" or presence requirements for sales tax collection have been overruled. This means that in the near future, businesses maybe subject to new sales tax collection requirements.

For businesses, the physical presence rules for sales tax collection have been overruled, possibly subjecting businesses to sales tax collection requirements in the near future.

 

The "South Dakota vs. Wayfair, Inc" decision provides a threshold for sales tax collection: over $100k sales or 200 transactions, and a business will be required to withhold sales taxes in any state that enacts laws following this decision. Consequently, businesses will need to keep close track of sales to other states.

 

For individuals, it is likely in the future that any purchases you make online will end up costing more, as sales taxes average around 7%.

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