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Sales Tax Nexus No Longer Requires a Physical Presence


The United States Supreme Court ruled in favor of South Dakota and against Wayfair on Thursday in their first major sales tax case in over two decades. This will result in large impacts for businesses making sales to customers, as states begin requiring them to collect and remit sales tax even when they have no physical presence in a state.

Previously, a business needed a physical presence in a state in order to create nexus, or a filing requirement, for sales or use taxes based on the Quill decision.

With Thursday’s ruling, Quill has been overruled and no longer applies. The Supreme Court then remanded the case to determine if there are any other constitutional arguments against enforcement of South Dakota’s law. Currently South Dakota deems business with $100,000 or more in sales or 200 or more transactions in South Dakota per year to have a sales tax filing requirement. We expect most states to adopt similar laws (and many already have).

Many uncertainties still exist and much has already been written about them in the press. Will other states’ laws be enforced retroactively? Will states adopt the South Dakota nexus thresholds or something lower? Will Congress pass legislation to address any of these issues or legislate a compromise between business and state interests? How will the states decide to enforce their sales tax collection requirements – will there be a tax amnesty program and, if so, which states will participate?

Until we get more clarification on these unknowns, there are several things businesses can do now to prepare:

  • Ensure IT systems and accounting software are adequate to track sales information and comply with new reporting requirements.
    • How many sales and transactions does your business have in each state and is this over that state’s nexus threshold (if any)?
    • Are your business’ products or services subject to tax in states where you have a filing requirement?
    • How will your business comply with new registration and filing requirements? Is automation a solution and is it compatible with your systems?
    • Review your business’ policy on collecting resale and exemption documentation from customers to make sure it covers all states imposing a sales tax.

We are monitoring these issues and will provide more information as guidance becomes available.

If you have questions on how this will impact your business, please reach out to Rachel Roberson (rroberson@bpcpa.com) or your Berntson Porter CPA to start the discussion.