Impact of The Wayfair Decision on Sales Tax for E-Commerce (products and services)

The following article originally appeared in BDO USA, P.A.’s “State and Local Tax Insights” blog (Fall 2018). Copyright © 2018 BDO USA, P.A. All rights reserved. BDO.com.

Impact of Wayfair

On June 21, 2018, the U.S. Supreme Court issued its widely anticipated decision in Wayfair. The Court held that states may require businesses to collect and remit sales and use taxes even if the business has no in-state physical presence.

The Wayfair decision means that states are now free to subject companies to state taxes based on an “economic” presence within their state. Overnight, remote sellers, licensors of software, and other businesses that provide services or deliver their products to customers from a remote location will have to start complying with state and local taxes.

Left unchecked, these state and local tax obligations, and the corresponding potential liability from tax, interest and penalties, will grow over time. Moreover, neglecting your sales and use tax obligations may result in a lost opportunity to pass the sales and use tax burden to customers as intended by state tax laws.

Wayfair – What Does it Mean?

• Every company that does e-commerce may be affected.
• Wayfair’s economic and virtual contacts with South Dakota, as measured by more than $100,000 of sales or 200 separate sales transactions satisfiedWayfair’s substantial nexus definition.
• Companies that sell tangible personal property or services over the internet – so called remote sellers- may be required to register and collect sales tax.

Questions a Business Should Ask

• Does my company sell goods or services into states where it is not registered or filing sales/use tax returns?
• Does my company ship goods or provide services to customers located in states where we have little or no physical presence?
• What product or service is sold?
• If the product or service is not taxable, is there a registration requirement?
• Has nexus been created in other ways?
• If I have established nexus for pre-Wayfair periods, what mitigation strategies can I take?
• Does my company sell goods or services into states where it is not registered or filing sales/use tax returns?
• Does my company ship goods or provide services to customers located in states where we have little or no physical presence?
• What product or service is sold?
• If the product or service is not taxable, is there a registration requirement?
• Has nexus been created in other ways?
• If I have established nexus for pre-Wayfair periods, what mitigation strategies can I take?

We Can Help

The impacts of the Supreme Court’s Wayfair Decision will play out differently according to state specifics. The following details apply to South Carolina:

Economic Nexus Threshold: $100,000 in gross revenue from the sales of TPP, products transferred electronically, and services delivered into SC in the previous or current calendar year.

Legal Effective Date: 11/1/2018

Administrative Enforcement Date: 11/1/2018

Please contact us to understand your tax implications. We’re here to help.