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States Respond to the Wayfair Decision

August 20, 2018

By Harold Hecht and Seth Rabe

The South Dakota Supreme Court issued its decision in South Dakota v. Wayfair, Inc. on June 21st (see our Tax Alert: The Wayfair Decision and the Changing Landscape of Sales Tax).

Since that time, even though the Wayfair case was remanded to the South Dakota courts for further evaluation, numerous states that already had economic nexus-type statutes have issued guidance, including effective dates, for taxpayers to register and begin collection of sales tax.

Others have enacted legislation designed to be similar to the standards of the South Dakota law. Clearly, these states believe that South Dakota will ultimately prevail on the remand and any further challenge.

However, this outcome is not final until all reviews and appeals are decided. During this period of uncertainty, companies will need to decide whether to begin complying with these state standards, or risk potential liability for failure to collect tax in the future.

Although approximately 25 states currently have legislation similar to South Dakota, not all of them have issued guidance as to when they require registration and collection. Below is a sample of just a few of the states that have weighed in on Wayfair:

Alabama
On July 3, 2018, the Alabama Department of Revenue issued guidance for online sellers stating that the Department will prospectively tax remote sales made on or after October 1, 2018. Alabama requires at least $250,000 of sales into the state in order to establish nexus.

Connecticut
Effective December 1, 2018, Connecticut will expand its sales tax nexus standard to include remote sellers who surpass $250,000 and 200 annual transactions to customers in the state.

Illinois
Effective October 1, 2018, Illinois remote sellers with sales exceeding $100,000, or 200 or more transactions in the state have nexus.

Michigan
After September 30, 2018, remote sellers with sales exceeding $100,000, or 200 or more transactions with Michigan residents have an economic nexus with the state.

New Jersey
Effective October 1, 2018, remote sellers with more than $100,000 in gross revenue or 200 or more transactions into New Jersey will be required to register and collect sales tax.

Mazars Insights
As noted, the above are just a sample of the states that will require collection of sales tax in the very near future. Companies selling taxable products remotely at retail, via the internet or otherwise, will need to quickly review their prior sales, both dollar amount and order volume, and evaluate whether to collect sales tax in impacted states.

Please contact your Mazars USA LLP professional for additional information.

 


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