Have you ever gone online shopping and realized you were never charged sales tax on the items you purchased? To this day states make it so unclear whether or not an online company has a requirement to collect and remit sales tax. However, a recent Supreme Court case has changed online shopping as we know it.
Nexus is the determining factor of whether or not you are doing business within a state and ultimately decides if your business will have a tax requirement. Previous rules stated that only businesses that have a physical presence in a state were forced to collect taxes on sales made to that state. This rule was established by a court case known as Quill Corp. vs. North Dakota. On June 21, 2017 South Dakota vs. Wayfair, Inc. the Supreme Court overruled Quill v. North Dakota arguing that the case calls out catalog sales and is outdated in a world of e-commerce. This means that states are now allowed to collect tax on items sold online even if there is no physical presence in the state.
What does this mean for your business?
There is a lot of unknown that comes with the South Dakota vs. Wayfair ruling. Will states supply bright-line tests such as $100,000 in sales or 1,000 orders or more and then the tax collection requirement kicks in, or will it be even on one single sale in the state?
On July 25th, 2018 Minnesota set a remote sellers collection date that requires any remote seller that has 100 or more sales shipped to Minnesota or 10 or more sales shipped to Minnesota that total $100,000 or more must begin collecting sales and use tax by October 1, 2018.
Those with online sales in multiple states that are currently not collecting sales tax will need to keep an eye out for new laws getting pushed through on a state by state basis.