Have Sales Tax Rules Changed for Businesses?

If you are not tax nerds like us, you may not be aware of the June 21, 2018 U.S. Supreme Court decision on South Dakota v. Wayfair.  Basically, the U.S. Supreme Court struck down an old decision (U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota) that said that a state could not force an out of state seller to collect and remit sales tax to them if the retailer had no physical presence in the state.  Physical presence would mean that the retailer had a location in the state, had employees in the state, or delivered the products there themselves or used a private shipper, not a common carrier such as UPS, Fed Ex or USPS.

How will this affect you? 

If you don’t sell goods, or don’t ship them to anyone out of state, or make sales while out of state at a trade show etc., the only affect for you will be that you will most likely begin to see sales tax being charged on out of state and online purchases that you make.

If you do sell/ship goods out of state the Supreme Court decision could affect who you must collect sales tax from, but that will depend on which states you ship to and how much you ship to that state.  We don’t have all the answers right now.  States are scrambling to put new laws in place, or to clarify laws that they already have in place.

Each state has their own sales tax laws.  For example, Indiana passed HEA 1129 in 2017 that said:

**Pursuant to HEA 1129 (2017), Indiana law (IC 6-2.5-2-1(c)) requires a seller without a physical presence in Indiana to obtain a registered retail merchant’s certificate, collect, and remit applicable sales tax if it meets either or both of the following conditions in the previous calendar year or the current calendar year:

  1. You have gross revenue from sales into Indiana exceeding $100,000; or
  2. You have 200 or more separate transactions into Indiana.

The Constitutional validity of HEA 1129 was challenged in court and the Department was prohibited from enforcing the obligation to require remote sellers to collect sales tax until the lawsuit was resolved.  On August 27, 2018, the lawsuit challenging the Constitutionality of HEA 1129 was resolved and the Department was authorized to begin enforcing Indiana’s economic nexus law on October 1, 2018.

 ***Note that this is the law for Non-Indiana retailers selling goods to someone in Indiana, I am only using it as an example***

Another state says that you must collect sales tax if your gross revenue in their state is $50,000 or more.  Some states may say that you must collect sales tax on the first dollar earned from goods shipped to their state.  Every state may be different and the date that they may begin collecting sale tax on out of state retailers will not the same for every state.

If you do sell/ship goods to other states and would like us to research the sales tax law for those specific states, please let us know.  We will be glad to help you but must charge for our time to do so.