If you think sales nexus only applies to online businesses or in the states you set up shop, think again.
Last month, the Supreme Court overturned a 1992 sales nexus decision (Quill v. North Dakota) that prevented states from collecting tax from out-of-state sellers. With the landmark South Dakota v. Wayfair decision, states are saying, “I’ve got the power!” The June ruling came out in favor of states, granting them power to require out-of-state retailers to collect sales tax from resident buyers. This is a big deal – here’s why.
Implications of New Sales Tax Nexus Legislation
It’s not just about where you operate anymore, but where your buyers are.
If you sell goods or services (regardless of sales channel), the Wayfair ruling applies to you. Online sellers (e.g. Amazon third-party sellers) are heavily impacted by this decision because they inherently sell to customers in different states, but it’s likely to touch anyone who sells across state borders or lives in a state that has a sales tax.
That’s because the Quill “physical presence test” for sales tax collection and remittance (limited states from charging sales tax to out of state sellers) was overturned in the Wayfair decision and replaced with an “economic sales tax nexus”, allowing states to expand their sales tax rules and impact more out of state sellers.
Economic nexus takes the throne.
Economic nexus is typically based on sales or gross receipts that are earned from sales to customers within a specific state. Each state sets its own rules for the minimum sales activity required to initiate sales tax requirements, and sales nexus thresholds, exemptions, and effective dates vary from state to state.
Economic nexus isn’t the only way you’ll be evaluated, either – states will continue to enforce existing nexus rules, regardless of economic nexus. This means that your business is now faced with having to navigate a slew of new and changing state regulations that dictate:
a) Where you must collect tax,
b) Whether your goods are taxable, and
c) How you are required to handle the new tax computation, filing, and remittance obligations.
So, how will your business keep track of all the changes and make sure it’s in compliance? It’s not that easy for a sales-nexus novice to handle alone.
Next Steps for Business Owners
1) Assess state tax requirements that apply to you: With each state serving up different sales nexus rules, keep tabs on which ones need data from you. Then, take inventory of where you do business (selling, servicing, manufacturing, warehouses and storage, etc.)
2) Get help from a tax professional: MoneySolver’s SalesNexusSolver™ can help with determining where you’re required to collect sales tax and whether you need to file or amend returns. Getting help up front can prevent problems in the future, like owing a debt or being audited, and a competent tax professional can help you track and analyze your sales nexus liability in this rapidly evolving state tax environment.
Get ahead of the curve before it hits – and hurts – your sales and business you’ve worked so hard to build. Talk with our sales tax professionals for a free consultation today at to see where the rules may have changed on you, or check out our other business services at MoneySolver.org.