On 21 June 2018, the US Supreme Court passed a landmark decision that transformed the landscape of sales tax in the US. The South Dakota vs Wayfair decision effectively permitted states to create new rules for sales tax collection requirements based on the dollar or transactions amount of sales – otherwise known as economic nexus. Previously, companies were only required to collect sales tax based on a physical presence test. Over the past year, thousands of US companies have had to grapple with this new requirement. However, US companies are not alone. The implications Wayfair are being felt around the of globe, and many international companies are faced with difficult decisions if, when, or how they should comply.
In general, prior to Wayfair, international companies with no US physical presence were not required to collect sales tax. Now, any company with sales to an individual state that exceeds the general standard USD 100,000 or 200 transactions of in the current or prior year, will required to collect and remit sales be tax. If companies do not comply, heavy interest and penalties may occur, and sales tax is also considered a trustee tax in the US, making officers and owners of the company personally liable for any under-collection.
Although technology has eased the burden with many online solutions for collecting and remitting sales tax available, it will not negate requirement to register in up to the 46 states and many more localities. These new rules will affect industries, including wholesale,all retail, e-commerce, and digital goods.