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Important Changes to State Sales and Use Tax

  • February 13, 2019 by hamiltontharp
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In July, the U.S. Supreme Court issued one of the biggest tax cases in decades, which dramatically expands when states can require out-of-state businesses selling to customers in their state to collect and remit sales and use taxes.  This change will have a huge impact on anyone selling items or services over the internet.

If you are selling items to customers in other states, it’s important that we talk soon so we can set up systems now to track what sales are being made where, and whether you might be required to register in any other state due to expanding filing requirements.  Getting ahead of these changes now can prevent you from being subjected to numerous fines and penalties later.

Prior to U.S. Supreme Court’s decision in Wayfair, Inc. vs. South Dakota, a state could only require a business to collect sales or use tax from customers if the business had some type of physical presence in the state, usually by owning, leasing or storing property in the state or having an employee or agent in the state.

Now states can require out-of-state sellers to collect and remit sales and use taxes if they make a minimum number of sales to customers in their state (in terms of dollars and / or transactions), even if they have no physical presence in the state.

This is a huge revenue raiser for the states and, not surprisingly, states are changing their requirements for out-of-state sellers on an almost daily basis.  To complicate matters even more, each state and each local taxing jurisdiction may have different rules.

Most small retailers making only a few sales into a state will not be impacted because states are providing exceptions for businesses only making a minimum level of sales (e.g., less than $100,000 in annual gross revenues and / or less than 200 annual transactions.

To determine exceptions for small retailers, click here to check this listing by state.

Please contact us if you need assistance in determining your out-of-state sales tax obligations.

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