South Dakota v. Wayfair: 11 States Begin Collections in October 2018

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Online sales tax laws for 11 US States come into effect on October 1, 2018, following US Supreme Court Wayfair Ruling

Update: At McFadyen Digital, we have been tracking the historic US Supreme Court ruling around online sales tax laws with our in-depth industry coverage.  On June 21, 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair Inc. that online retailers across the US must collect sales taxes, even in states where they don’t have a physical presence in the tax jurisdiction. Here is our update as of October 2018. 

Introduction
The US Supreme Court Wayfair Decision has begun to impact Ecommerce in 11 states across the US. Sales tax collection regulations in these states now require online retailers to collect sales tax on online orders from October 1, 2018. In quick succession, states have begun moving in quickly to tap online sales as a much needed new revenue stream. The U.S. Government Accountability Office in December 2017 estimates states could be missing out on $8.5 to $13.4 billion in revenue due to consumers not paying up.

Earlier in June 2018, In South Dakota v. Wayfair, the U.S. Supreme Court overruled the physical presence nexus standard of Quill and National Bellas Hess with regard to state and local taxation of remote sales. Soon after the Supreme Court Wayfair ruling, the states began issuing guidance /statements and introducing legislation in response to the decision in the Wayfair case. These states are now reclaiming their authority over sales tax collection.

Wayfair Ruling Impact across 11 States
Here is a listing of the states, their respective revenue and sales thresholds explained by notes on online sales taxes.

State Revenue Threshold Sales Threshold Notes
Alabama N/A $250,000 Sellers exceeding the $250,000 sales threshold must register for an Alabama sales tax permit, collect sales tax shipments to Alabama, and remit that sales tax to the state. Merchants using the Simplified Sellers Use Tax Program (SSUT), the program Amazon uses, means a flat 8% sales tax is levied.
Illinois $100,000/yr gross revenue $100,000 in sales annually in the state or more than 200 transactions in the state in the previous twelve months If a seller meets the sales or transaction number thresholds, they must register for an Illinois sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Indiana $100,000/yr gross revenue Sales in Indiana in more than 200 separate transactions in the current or last calendar year If a seller meets the sales or transaction number thresholds, they must register for an Indiana sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Kentucky $100,000/yr gross revenue Makes sales into Kentucky in more than 200 separate transactions in the previous or current calendar year If a seller meets the sales or transaction number thresholds, they must register for a Kentucky sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Maryland $100,000/yr gross revenue Makes sales into Maryland in more than 200 separate transactions in the previous or current calendar year. If a seller meets the sales or transaction number thresholds, they must register for a Maryland sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Michigan $100,000/yr gross revenue Makes sales into Michigan in more than 200 separate transactions in the previous calendar year If a seller meets the sales or transaction number thresholds, they must register for a Michigan sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Minnesota $100,000/yr gross revenue Makes sales into Minnesota in more than 100 separate transactions in the previous 12 months If a seller meets the sales or transaction number thresholds, they must register for a Minnesota sales tax permit, collect on shipments to the state, and remit sales tax to the state.
New Jersey  N/A Sales of $100,000 in New Jersey and more than 200 transactions in the state in the current or last calendar year. If a seller meets the sales or transaction number thresholds, they must register for a New Jersey sales tax permit, collect on shipments to the state, and remit sales tax to the state.
North Dakota N/A Sales into North Dakota exceeding $100,000 or sales were made in 200 or more separate transactions If a seller meets the sales or transaction number thresholds, they must register for a North Dakota sales tax permit, collect on shipments to the state, and remit sales tax to the state.
Washington State N/A Sales of $100,000 or more into the state OR 200 separate transactions into Washington in the current or last calendar year Washington State has a Notice & Report policy not affected by the Wayfair ruling, where sellers exceeding $10,000 in sales to orders shipped to the state: 1) Register for a Washington sales tax permit, collect on shipments to the state, and remit sales tax to the state, and 2) Comply with Washington’s notice and reporting requirements.
Wisconsin  N/A Sales of $100,000 or more annually or 200 or more separate transactions into the state in the current or last calendar year. Wisconsin will require remote sellers to collect and remit sales or use tax on sales of taxable products and services in Wisconsin. New standards for administering sales tax laws on remote sellers have been developed by rule. The rule is consistent with the Court’s decision in Wayfair, which approved a small seller exception for sellers who do not have annual sales of products and services into the state of (1) more than $100,000, or (2) 200 or more separate transactions.

(Source: https://blog.taxjar.com/economic-nexus-laws/)

Thirty two states, in addition, have statutes or regulations in place to require sales tax collection by remote sellers. As more state regulations take effect, one challenge looms large for online retailers. They need to navigate a complex raft of online sales laws across 50 states in the US.

Predictably, the Wayfair decision has many retailers, along with their accountants, lawyers and vendors, scrambling to ensure their sites are compliant across all US states. As Jason Brewer, executive vice president, communications and state affairs at the Retail Industry Leaders Association observes: “States, in their own way, are implementing either via regulation or statute what they need to promote or compel sellers to comply.”

Wayfair Decision’s Domino Effect on online B2B Sellers
The Wayfair decision casts a whole new operational dimension for online B2B operators who are looking to grow their presence across US markets. In effect, the Wayfair decision implies that local and state governments can now look ahead to collecting sales tax from manufacturers, distributors and wholesalers who sell to other businesses as well as directly to consumers.

There are concerns among manufacturers, distributors and wholesalers regarding the collection of sales tax by “remote” online and catalog sellers. Consider that state and local taxing authorities are now free to require sales tax processing by any seller with a “substantial” economic presence in their state. Capturing the sentiment across the online B2B seller community, Brian Fricano, CEO of online distributor Sustainable Supply says:  “We have concerns, as each state has their own requirements.”

Most importantly, as an online seller, you should start to check your tax-collection responsibilities, which varies widely among states for business-to-business sales. The states have much work to do around clarifying their online sale tax rules. This especially applies to annual revenue thresholds that require tax collection. All sellers, including B2B, are advised to review their tax-collection policies and prepare for coming changes.

In Closing
At McFadyen Digital, we are actively monitoring the ramifications of the Wayfair decision. We are committed to keeping you updated about the news and developments of this historic US Supreme Court ruling. As an Ecommerce operator, you need to adapt quickly to these new rules and be prepared to properly rate, collect, and account-for these new sales tax collections. We’ve created a popular handy checklist for what you need to consider in order to adapt to the evolving rules resulting from the US Supreme Court Wayfair landmark decision.

Be sure to
download this checklist for more details and please reach out to us (info@mcfadyen.com) with any questions or if there is anything we can do to help your organization adjust to these new tax rules.

Sources
https://blog.taxjar.com/economic-nexus-laws/
Wayfair Decision Insights for Marketplace Operators
US States that are prepared to collect online sales tax
KPMG report: Follow-up State actions on Wayfair decision
US Supreme Court Wayfair Ruling comes into Effect in 11 US States
What You need to know about the US Supreme Court Wayfair Decision

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