Online Sales Tax

Online retailers (big and small) beware, in a recent United States Supreme Court case (South Dakota v. Wayfair, Inc.), they have overruled a previous decision to allow states a wide range of options when it comes to online retail tax. This isn’t to say there will be definite ramifications, it is just to say keep note of possible changes coming in the future.

The old rule came from the Quill ruling which decided a physical presence or a nexus was required to collect tax. A physical presence was typically decided by a brick and mortar store, employees within the state, or some sort of distribution method that was a combination of factors. This has changed with Quill rule being overturned because states will now have the ability to decide how to apply a tax to companies that operate without a physical presence in the state. Previously large retailers such as Amazon and Overstock had begun paying sales taxes because nexus’s laws would incorporate a behemoth company to pay out sales tax, but now states may begin to target smaller retailers.

This isn’t to say panic or assume all states will begin charging tax on smaller businesses, in the past many states have tried filing laws that would specifically only target companies larger in size. This is merely a warning to be on the lookout for changing tax laws for states you may ship to. If you have questions about your online business and taxes you may owe, contact the tax professionals at the Center for Financial, Legal & Tax Planning, Inc.