Howard, LLP

Howard Insights: New U.S. Supreme Court Decision is a Game Changer

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Dallas, Texas, July 2018 – On June 21, 2018, the Supreme Court issued its opinion in South Dakota v. Wayfair (a landmark sales and use tax nexus case).  The Court ruled 5 to 4 that states can require an out-of-state seller to collect and submit sales or use tax on sales to customers even if the seller does not have an in-state physical presence (nexus).  Prior to this ruling, nexus was determined by whether or not the seller had a physical presence in the state.

In the Wayfair ruling, the Court had to address the constitutionality of the South Dakota law which required certain remote sellers to collect and submit South Dakota sales tax.  The Court held that South Dakota’s legislation did not violate the Commerce Clause of the U.S. Constitution. The law required the collection and submission under the following circumstances.

During the previous or current calendar year:

  • Gross revenue from sales of taxable goods and service delivered into the state exceeds $100,000; or
  • Had 200 or more sales of taxable goods.

States will be using the Court’s ruling to enact, revise, and adapt legislation as well as adopting their own economic threshold policy for out of state sellers. Companies (including internet and web based sellers) will now need to determine if they have met the transaction threshold for each state to which they deliver taxable products or services, and whether or not to collect and submit sales taxes to that state.

Please let us know if we can assist with any questions, or if need assistance with tax planning. Our team looks forward to the opportunity to help you.