The Supreme Court Ruling South Dakota v. Wayfair in a Nutshell

By John SerdarSeptember 20, 2019

Background

On June 21, 2018, the U.S. Supreme Court in South Dakota v. Wayfair , Inc. ruled in favor of the state of South Dakota, a decision that overturned the previous physical presence standard for substantial nexus; allowing states the ability to impose economic nexus laws on all online and offline remote sellers.

What is Economic Nexus?

Economic Nexus allows states to establish sales tax obligation for remote sellers if certain revenue, transaction volume or other combination of factors are met for a particular state. Even though your business might not have a physical presence established in a particular state, due to this change you might now be required to comply with local state tax laws and collect sales tax from buyers.

Are the thresholds standard?

Unfortunately like many tax fields, there is no one uniform standard. The thresholds which trigger economic nexus vary in each state and are influenced by a variety of factors, including the types of transactions involved, revenue and transaction amounts. In short, the days of avoiding out of state sales tax obligations are coming to an end.

Where’s my exposure?

Even though Economic Nexus laws vary state by state, here at EXEMPTAX we may be able to point you in the right direction via our Free Economic Nexus Test. Please keep in mind that laws and regulations in the field are constantly changing, and as always we recommend that you consult with a vetted sales tax expert.

I deal with tax exempt or resale transactions, how does this ruling affect me?

If you deal with tax exempt or resale transactions, as a result of increased nexus, you may now be subject to additional compliance rules pertaining to the handling of resale and tax exemption certificates. Failure to properly substantiate exempt sales is often one of the leading causes of why companies get audited. It’s important for sellers to make sure that they continue to properly collect, validate, renew and store exemption certificates for audits. At EXEMPTAX we help sellers manage their exemption obligations and reduce their audit risk.

Do you have more questions about exemptions? Join the discussion and drop us a comment below.

Sales tax rules and regulations change frequently. Although we hope you'll find this information helpful and informative, this blog is for informational purposes only and does not provide legal or tax advice.