In a 5-4 decision on Thursday, June 21, the Supreme Court ruled that states can collect online sales tax—discarding the court’s longstanding rule that states cannot require companies without a physical presence to collect sales taxes. The decision reverses decades of history dealing with sales tax and retailers’ obligation to collect and remit tax when goods are sold across state lines. The Supreme Court’s ruling opens the door for states to impose an economic nexus standard when it comes to sales tax collection responsibilities.
Though the decision will boost state revenues at the expense of consumers and sellers who have avoided sales taxes in the past, it did not specify what types of exceptions states may impose to limit the burden on small businesses. Many states have recently passed laws requiring collection responsibilities on companies with a certain amount of sales within the state, even if they have no physical presence. However, because the Supreme Court had previously ruled a physical presence was required to impose a collection requirement, many states have not actively enforced these laws. With the South Dakota v. Wayfair decision, states will likely reassess how law can be crafted to take advantage of this new sales tax standard.
If you have a company that sells goods in multiple states be aware: the sales tax landscape is changing. Even if you do not have a physical presence in a state, collection responsibility may now exist.
At Lawhorn CPA Group, we stay well-informed with the ever-changing tax terrain. Unsure of what this may mean for your business? Or if your business will be affected at all? Call us today at 865-212-4867 to schedule a time to meet with one of our tax professionals, or you can contact us online HERE.