The U.S. Supreme Court just ruled on a landmark sales tax case, South Dakota v. Wayfair, Inc., that will change the way in which multistate businesses will be subject to sales tax in states where they have sales but no physical presence in the state.
Prior to the ruling, the standard for triggering a sales tax liability for out-of-state businesses was whether the business had a physical presence in the taxing state, such that a business that had sales into a state would not be subject to sales tax in that state if it had no physical presence in the state.
However, the Wayfair case now allows states to potentially impose a sales tax liability on out-of-state businesses that have no physical presence in the taxing state.
In Wayfair, South Dakota imposed sales tax liability on an out-of-state business that had no physical presence in the state, provided that the out-of-state business had more than $100,000 of sales or more than 200 transactions annually in South Dakota.
Accordingly, businesses with sales into multiple states should be aware of their potentially new exposure to sales tax liability in states where they were previously immune based on lack of physical presence.
If you have any questions, feel free to reach out to our state and local tax team.