The recent Supreme Court decision in South Dakota vs. Wayfair, Inc., ruled that states can require online retailers (like Wayfair) to collect and remit sales tax if they have a substantial nexus, or business connection to the state, but do not necessarily have a physical presence in the state. The result of this recent case overturned a 1992 decision, Quill vs. North Dakota, which ruled in favor of Quill and barred states from requiring businesses without a physical presence, such as property or employees housed in the state, to collect and remit sales taxes. Implications of this recent ruling are big for both online retailers and governments, so naturally there’s been a flurry of activity to understand the short and long-term impact.
Central to the South Dakota vs. Wayfair case are Economic Nexus Laws, which would allow states to require remote sellers to collect and remit sales tax after they make a certain amount of sales in that state. Until now, the legality of these laws were unclear because they appeared contrary to the 1992 ruling mentioned above.
Now that the Supreme Court has given states permission to require out of state businesses with no physical presence to collect and remit sales taxes, it’s important to understand which states have existing Economic Nexus laws because they will likely be the first states to require companies to collect sales tax. The map above shows the status of states that are most prepared to start online taxes, states that have already implemented an online tax, and states that do not collect a sales tax at all.
Sales tax collection and remittance can be complicated for any business and it’s fair to assume its complexity will increase as more States implement Economic Nexus laws. In response to these laws, businesses will need to reevaluate their tax strategy and implement technologies with the proven ability to provide accurate, reliable tax information across the US.
GeoTAX.com from Pitney Bowes is one such solution to consider. GeoTAX.com is an easy-to-use online service that provides accurate State, Local, and Special Jurisdiction tax rates. Additionally, GeoTAX capabilities are available via API and enterprise deployments, enabling businesses of all sizes to integrate accurate tax rate information into their business processes, mobile applications and ecommerce Websites.
Watch this recorded webinar to learn more about the inevitable changes that are coming in regard to Online Sales Tax Rules.