U.S. Supreme Court Decides Physical Presence Nexus No Longer Required to Collect Sales Tax

Wolters Kluwer Tax & Accounting Suggests Businesses Conduct a Nexus Study to Understand Nexus Footprint and Its Implication

NEW YORK--()--Today, the US Supreme Court announced its decision in the South Dakota v. Wayfair, Inc. case to overturn the 1992 Quill, Corp. v. North Dakota nexus holding that a company must have a physical presence in a state before it can be held liable for the collection and remission of sales and use taxes in that state.

“Now that we have a decision, it is urgent that businesses track the legislative actions in the states where they conduct transactions”

“For South Dakota, the US Supreme Court decision means a remote seller with $100,000 in taxable sales or 200 separate taxable transactions delivered into South Dakota in the current or previous calendar year must collect and remit sales taxes,” said Mark Friedlich, Senior Director, Global Content Assets, Wolters Kluwer Tax & Accounting, North America. “Essentially the US Supreme Court has remanded the case back to South Dakota Courts, which means the collection of state taxes and the definition of economic nexus will continue to evolve.”

Today’s ruling upholds South Dakota’s use of Economic Nexus which is established when a seller from another state makes sales within that state exceeding the $100,000 threshold or 200 separate transactions. Since the original Supreme Court decision in 1992 for Quill, Corp v. North Dakota, growth in the digital landscape has transformed business commerce. In 2006, eCommerce sales in the United States exceeded $100 billion per year, compared to $123 billion of online sales conducted in just Q1 of 2018. As a result, some states have lost access to sales tax revenue and as such pursued creative nexus regulations to capture sales tax revenue.

“Now that we have a decision, it is urgent that businesses track the legislative actions in the states where they conduct transactions,” said Friedlich. “With over 10,000 taxing jurisdictions across the United States, retailers and tax professionals should be leveraging a set of tools that combine the deep domain tax jurisdiction expertise with software that can quickly and easily enable retailers to collect and remit sales taxes as needed. This story has not ended, and one must be ready for a change in economic nexus likely to be adopted by many other states.”

Wolters Kluwer Tax & Accounting CCH® SureTax® provides real-time, accurate multi-vertical tax calculation and report solutions. With industry specific taxability content and rules, CCH SureTax supports the most complex sourcing and tax calculation rules found in communications, energy and general sales and use while providing a platform for growth. Wolters Kluwer Tax & Accounting experts have written extensively about this case on the SalesTax.com blog. Find several articles here.

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