LGT's Profit Sense

The Wayfair decision

On June 21^st, the United States Supreme Court issued its long-awaited decision in South Dakota v. Wayfair, overturning the requirement that an out-of-state seller have physical presence in order for a state to require the seller to collect and remit state and local sales tax.  Under the Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, a taxpayer had to have a physical presence in a State to have “substantial nexus” so that the State could require the taxpayer to collect and remit sales tax.  Under Wayfair, substantial nexus exists if the taxpayer “avails itself of the substantial privilege of carrying on a business in that jurisdiction.”

What it means for you

Many states will now require “remote sellers” to collect sales tax even without a physical presence, although states vary greatly with respect to the circumstances that will trigger this sales tax collection responsibility.  If you have significant sales in states where you currently do not collect sales tax, you are therefore running the risk that you are generating an ever-growing sales tax liability. 

LGT is closely monitoring how each state is reacting to the Wayfair decision.  Many states already had similar laws on their books that were conditional on a favorable outcome of the Wayfair case before going into effect.  Many other states are rushing to pass legislation or regulations so that they can begin collecting sales tax from remote sellers.

If you wish to discuss these matters further, please reach out to the partner in charge of your account or call Jon Wellington, Principal of State and Local Taxes, at 214-461-1430.