With the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc, physical presence is no longer required for a seller to be subject to collecting tax on sales into a state. If a company’s activity demonstrates substantial nexus with a state, the state can require it to collect sales tax.
It is still unclear from the Wayfair decision how low the threshold of activity can be to establish substantial nexus. Wayfair did conclude that $100,000 of sales or 200 sales transactions into a state meets the constitutional threshold for allowing a state to require companies to collect sales tax.
In the wake of Wayfair many states are enacting sales tax regimes like South Dakota’s with different thresholds and varying effective dates.
Companies must now analyze and compare their sales data to current sales tax laws on a state-by-state basis to find where their potential sales tax liabilities exist.
Contact Fred Day if you have questions about your company’s exposure.