01/11/2019

Sales Tax after WayFair

More online purchases are hit with sales tax…

Thanks to a landmark Supreme Court case that gives states greater power to impose sales tax on e-commerce. In June, the Court overturned a ruling that shielded sellers with no physical presence in the buyer’s home state from collecting sales tax.  The Court blessed S.D.’s internet sales tax.  The law requires remote sellers with at least $100,000  in sales or 200 or more  transactions annually in S.D. to collect S.D. sales tax from buyers in the state.  The Court clearly signaled its support for the S.D. law, partly because it isn’t applied retroactively and it provides a  small-business exception.

Many states are taking S.D.’s lead and expanding their sales tax reach.  The Supreme Court ruling is a welcome relief to states that generally impose sales tax but haven’t been able to fully reap  revenues from web sales made to their residents.  About half now have laws taxing online purchases from remote sellers.  A few had enacted statutes that were put on hold pending the high court decision.Most states are copying the S.D. law and its small-business exception.  Hawaii, Ill., Ind., Ky., Mich., Nev., N.J., N.C., R.I., Wis. and others have taken this route.

The Court was comfortable with S.D.’s $100,000 sales/200 transactions thresholds,  so it makes sense for states to adopt these standards to avoid future legal challenges.  Some give more protection for small sellers in their internet sales tax laws.  In Conn. and Ga., for example, the in-state sales threshold for collecting sales tax is $250,000. Ala. and Miss. have also set a $250,000 in-state minimum threshold, but they don’t have a minimum transaction component in their remote seller laws.  Pa. and Okla. are outliers. Pa. has a $10,000 yearly in-state sales threshold
and no minimum transaction requirement. In Okla., remote sellers with $10,000 or more in sales must collect tax or comply with “notice and reporting” requirements.  Both of these laws widely diverge from the S.D. statute OK’d by the Supreme Court.

Look for even more states to jump on the bandwagon. Ark., Calif. and Texas are just a few that are considering changes or already have proposals in the pipeline.  But Alaska, Del., Mont., N.H. and Ore…the five states with no sales tax…won’t act.

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David J Geslin CPA LTD

5775 Wayzata Boulevard, Suite 700 Minneapolis, MN 55416 cpa@davidgcpa.com