The overturn of 1992’s Quill ruling has sparked many questions as to how companies that have a multi-state presence move forward with the taxing of their out-of-state sales.
This new Wayfair ruling affects businesses throughout various industries, even beyond online retail sellers. Below are common questions and answers that will help you understand this new ruling, its potential impact to your company, and how you can move forward from here.
What is the Wayfair Ruling?
Since the 1992 Quill v. North Dakota ruling, businesses that did not have a physical presence in a state were exempt from collecting sales tax even from those buying from out-of-state. In the recent Supreme Court case of South Dakota v. Wayfair et al., the Court ruled in favor of South Dakota, declaring that physical presence is no longer needed in order for a seller to be required to collect and remit sales tax from their out-of-state buyers regardless of the state in which they reside. In other words, states are allowed to collect sales tax from companies that do not have a physical presence in that state such as a brick-and-mortar location, warehouse, or corporate office if they meet a state’s economic threshold for overall revenue or number of transactions that came from that state.
Does this Apply to My Company if I am Not an Online Retailer?
It is correct that Wayfair is solely an online retailer. However, all businesses providing services and products to other states are affected by this ruling. There are a multitude of ways that companies can sell outside of their home-based state aside from online. This ruling can be applied to business deals done over the phone, through a catalog or email, and even via common carrier.
Regardless of how your company is processing transactions, if it is selling to an out-of-state buyer, your company is required to collect sales tax.
How does My Company Properly Comply with the Wayfair Ruling Moving Forward?
Review your previous operations regarding sales tax collection, and how you will operate in the future now that sales tax may need to be collected from each of your customers regardless of your physical presence in that state. Determine a plan of action and arm yourself with resources to assist you in your new tax responsibilities. Your company will need to gather data to determine in which states you are currently selling services or products and how you will need to comply moving forward. Depending on your analysis, you may need to hire a third party to guide you through the new changes and ensure your company is within compliance.
As your company navigates its way through the new tax requirements and processes, contact Squire for assistance in evaluating your individual situation and let them help determine how their professionals can serve you.