PPB March 2019

The Ruling That Changed Sales Tax Collection What small businesses need to know about a new law that affects collecting taxes on the goods they sell. by Mark E. Battersby E ver since the Supreme Court ruled that physical presence in a state is no longer the sole requisite for sales tax collection (South Dakota v. Wayfair, Inc., June 21, 2018) questions about sales tax collection—and remitting—have multiplied. While most states provide an exception for small sellers, the problem with these exceptions is they vary widely. Nor, is it clear who must collect sales taxes on which sales or pay a “use” tax on their own purchases. Prior to the Supreme Court ruling, states would only tax sales of businesses with a physical presence in the state. The Wayfair case changed that long-standing practice as the court found the respondents’ “economic and virtual contacts” with South Dakota to be a sufficient basis for a tax collection obligation (nexus). For economic nexus, a promotional products business establishes an obligation to collect and remit sales and use tax by its economic activity in a state. Unfortunately, determining when economic nexus has been established in a state is, once again, complicated, because there is little uniformity between jurisdictions. Collecting The economic nexus laws continue to rely on the volume of sales, the number 92 | MARCH 2019 | THINK