The recent South Dakota v. Wayfair Supreme Court decision has dramatically changed multi-state sales tax collection responsibilities for many retail sellers of products and service providers. Prior to this ruling, an online seller only had to collect sales tax in a state if the seller had a physical presence in that state. Now states are allowed to require an online seller who sells into a state to collect state sales tax. It is anticipated that states will aggressively pursue unsuspecting retail sellers of products and service providers who have not previously collected sales taxes from their customers.
The annual South Dakota sales and sale transaction threshold amounts challenged by Wayfair were $100,000 of sales or 200 sales transactions. Each state may determine its own criteria, which could be based on annual amounts or over a specific period of time.
As a result, sellers should now quantify specific state sales threshold amounts in order to evaluate their potentially expanded multi-state sales tax collection responsibilities.
It is recommended that sellers quantify the following annual sales information for states where they are not currently registered for state sales tax purposes:
- Annual sales amounts
- Number of annual sales transactions
We suggest using annual amounts as a starting point to evaluate each state’s exposure.
Accordingly, sellers should maintain accounting systems that will allow them to quantify their sales and sales transaction amounts by state. This information will allow them to evaluate the need to expand their multi-state sales tax compliance responsibilities.
Please contact us with any questions.
Joan Coffey: jcoffey@muellercpa.com, 708-349-6999
