South Dakota v. Wayfair, Inc.
The way states regulate internet sales tax changed due to the Supreme Court’s decision in South Dakota v. Wayfair, Inc. in June 2018. South Dakota filed a lawsuit because there was no sales tax required for out-of-state businesses, resulting in the state losing between $48 and $58 million annually because it could not collect internet sales tax. The ruling upheld South Dakota’s law requiring out-of-state sellers to collect and remit sales tax “as if the seller had a physical presence in the state.” This decision gave other states a way to enact similar laws requiring online sellers to collect and pay sales tax on online sales, even if they do not reside in that state.
What the law means for you
These issues relate to the concept of nexus between a taxing authority like a state and the tax-collecting company, commonly referred to as “tax nexus.” Before the internet, this nexus was physical since all businesses had a physical location (building, warehouse, retail store, etc.). In the Quill case, the concept of physical presence was affirmed, but in the Wayfair case, the court abolished the physical presence requirement for online transactions.
Compliance with internet sales tax laws
As an online seller, you must find a way to charge the correct sales tax to customers, add that amount to your accounting system, and report and remit the amounts to your state’s tax authority. Online sales tax services can help online sellers navigate this complex regulatory landscape.
Frequently Asked Questions
– How much does it cost to register and use an online sales tax service?
– How much can you sell online before you owe sales tax?
– What is a sales tax exemption?
These are some common questions you may have regarding internet sales tax laws. You can refer to the sources listed at the end of the article for more information and details on this subject.
Source: https://www.thebalancemoney.com/guide-to-internet-sales-tax-laws-5198008
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