Have You Reviewed Sales Tax Laws Lately?

The U.S. Supreme Court ruled in South Dakota v. Wayfair over two years ago. The ruling said that states may require out-of-state sellers to collect sales and use tax even if they lack a physical presence in a state. Since that time, most states that collect sales tax have enacted “economic nexus” laws that expand the reach of their sales tax collection obligations beyond their borders.

Most of these laws are in line with the one upheld in Wayfair. It applies to sellers that, on an annual basis, deliver more than $100,000 in goods or services into a state or engage in 200 or more separate transactions for the delivery of goods and services into the state. Some states have eliminated the number-of-transactions threshold to avoid applying their laws to small sellers, since it isn’t worth the effort to collect on those that sell 250 items at $1.50 each, for example.

We probably don’t have to tell you that since the COVID-19 pandemic hit us, online transactions have soared. If you own a business that sells products or services in states where you don’t maintain a physical presence, you should definitely review the economic nexus laws in those states and assess if you will owe taxes and how much per state. Also, some states have issued specific guidance on whether telecommuting employees temporarily working in a state because of the COVID-19 crisis create nexus for an employer who doesn’t operate in that state. We can help you explore and respond to these matters, so reach out soon so we can review your situation and offer advice.

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