SCOTUS Ruling on the Collection of Internet Sales Tax
On June 21st, 2018, The Supreme Court ruled in South Dakota v. Wayfair Inc., that states can collect sales tax from out of state internet retailers. This ruling overturned the previous physical presence law established in Quill Corp. v. North Dakota. The South Dakota legislation at dispute established a threshold for which online sellers had to collect and report sales tax. An online seller engaging in business in South Dakota has to collect and report sales tax if 1) they deliver more than $100,000 of goods to the state or 2) engage in more than 200 separate transactions to deliver goods to the state.
Current and Previous Laws
Now this type of law is not new. Many states have enacted what have come to be known as “Amazon Laws”. These laws are very similar to the South Dakota law described above where certain thresholds have to be met before an online retailer has to report and collect sales tax. Other states, including Texas, have relied on the previous, and now overturned, case law of Quill. In Quill, a business had to have a physical presence in the state in order to be subject to the state’s sales tax collection and reporting requirements. This excluded many online retailers from having to collect and report any sales tax.
Now states can, and most likely will, create some sort of legislation similar to South Dakota and other “Amazon Laws”. While there will most likely be caveats for small online retailers, I feel many e-commerce businesses will need to maintain sales tax reporting and compliance information for all the states they deliver products to.
Sales Tax and Case Law Resources
If you own an e-commerce business, it is important that you pay attention to any existing and proposed internet sales tax laws in the states you deliver products to. Here is a great resource outlining internet sales tax and general sales tax information for all 50 states. Also, here is the link to the Texas Comptroller’s office outlining the current requirements that, if met, compel an online seller to collect sales tax. Finally, if you are curious, here is a link to the South Dakota v. Wayfair Inc. opinion.