Sales Tax Alert - Wayfair
An Important Update Regarding Interstate Sales Tax
August 5, 2019
In 2018, the US Supreme Court case South Dakota v. Wayfair, Inc. overturned the physical presence requirements that determined a business's neeed to collect and remit sales tax.
Formerly, sellers were only required to collect sales and use taxes in states their businesses had a tax nexus, and this tax nexus was determined by physical presence for sales and use tax purposes. Due to the ruling in South Dakota v. Wayfair, Inc., businesses involved in interstate commerce could now be subject to sales tax laws in all states they are transacting within. If your business is engaged in internet based out-of-state sales, you could be exposed to new laws passed by more than 35 states requiring the collection of sales and use tax.
Most states have passed laws affecting sellers engaging in the "substantial privilege of conducting business" in the state, defining parameters that apply to remote sellers with annual in-state sales of more than $100,000 of products or services, or 200 or more transactions. Failure to comply with the sales and use tax requirements in all applicable states could have detrimental impacts on your company. Penalties on outstanding sales tax liabilities could bankrupt your company in as little as a few years' time.
If your business participates in interstate or on line sales of products or services, we urge you to familiarize yourself with the laws and sales and use tax requirements in states you're conducting business. Our firm does not monitor sales volumes or the number of transactions by state, nor do we register or file sales tax returns for you when preparing income tax returns. It is imperative if you have a website selling products or services, or you offer sales across state lines, that you familiarize yourself with these rules and protect your company. You must take action on this issue as it is not in the scope of our tax preparation engagement.
Consider contacting your elected Federal officials and alerting them of the need for a small business exemption with a threshold in $10 million in sales. Cost of compliance could overshadow revenues generated from out of state sales. With over 9,000 separate state and local taxing jurisdictions in the United States, we felt it critical to notify you and bring this issue to your attention. Please act sooner rather than later. We cannot over-emphasize the importance of compliance with these interstate sales and use tax rules.
GREENLEE, KURRAS, RICE, BROWN & GARNER, CPAs
Clare L Garner Jr CPA LLMT | 08/05/2019