One Year Later: How Does the Wayfair Sales Tax Ruling Affect You?
The U.S. Supreme Court’s ruling in South Dakota vs. Wayfair established that states can now require businesses to collect and remit sales and use taxes even if they don’t have a physical presence in that state. Most states have already enacted economic nexus statutes, and each state has its own set of regulations and quantity thresholds for requiring a qualified business to pay sales tax.
IF YOU ANSWER YES TO ANY OF THE QUESTIONS BELOW, YOUR BUSINESS IS LIKELY IMPACTED BY WAYFAIR:
- Does your company make sales or deliver goods/services into states in which you are not registered or ﬁling sales/use tax returns?
- Does your company ship goods or provide services to customers located in states where you have little or no in-state physical presence?
- Does your company provide online services or make sales of digital goods?
- Has your company received a nexus questionnaire or received audit or tax notices from any state where you are not currently registered for sales/use taxes?
MYTH NO. 1: MY COMPANY DOESN’T HAVE TO PRIORITIZE COMPLYING WITH WAYFAIR REGULATIONS RIGHT NOW.
If you are detected by a state and subject to its sales tax, there could be substantial taxes, penalties and interest due. Even if you are not liable for sales tax remittance, your business may be subject to significant penalties for failure to provide use tax notices and reports to customers or to the state.
MYTH NO. 2: ONCE MY COMPANY HAS EVALUATED A STATE’S REGULATIONS, I’M ALL SET FOR FUTURE COMPLIANCE.
Businesses should continue monitoring their activity and remain informed of the constantly changing regulations to determine if they are in compliance.
MYTH NO. 3: WAYFAIR DOESN’T APPLY BECAUSE I DON’T SELL MY PRODUCTS OVER THE INTERNET.
Any business—whether a large corporation or a small business—can find itself in a position where it is now subject to paying sales and use tax in other states, whether it actively participates in ecommerce or not. The Wayfair ruling has far-reaching implications, and your business should be proactive in assessing its unique sales/use tax situation to avoid unexpected results.
MEET THE EXPERTS
Kris Pryor is a Member in Warren Averett’s Tax Division, and she provides tax planning and preparation services, including federal and state tax controversy consultation and state and local sales and use tax services, with a strong focus on the retail and consumer industry.
Charles Bailey is a Member in the Audit Division of Warren Averett, and he provides audit and business consulting services with a focus on the retail and consumer industry.