Teipen Logo

What the overturned Quill Tax Compliance Case means to your business

Posted on July 15, 2018

The CPAs at Teipen Selanders Poynter & Ayres are paying close attention to a tax case with nationwide ramifications, the U.S. Supreme Court overturning of the Quill corporation decision in the case of South Dakota versus Wayfair. This recent court decision opens the door to allowing individual states to attempt to collect sales tax from out-of-state online retailers.

Overview:

Since 1967, remote sellers without a physical presence in a state could not be forced to collect that states’ sales tax. However, in the Wayfair case, the Court upheld a South Dakota law that requires remote sellers to collect tax if they have either 200 transactions or sales exceeding $100,000 in the state in a year.

What has businesses worrying is that under the new South Dakota law, no physical presence is now required. 
With the physical presence requirement to collect sales tax gone as a result of the decision, many firms are up in the air awaiting more guidance as to how to respond.

The CPAs at Teipen weigh in:

The Court’s historic decision will have a tremendous effect on sales and use tax collection responsibilities for companies that operate exclusively or primarily online.

As of this writing, at least seven states have enacted laws that mirror South Dakota’s legislation, and five more states have decisions pending. It is worth noting that many states have a variety of sales tax collection laws that do not require physical presence, and there are a number of bills currently in front of Congress addressing sales tax issues.

Details we are scrutinizing:

The Court held that South Dakota’s law did not violate the Commerce Clause because the state adopted the Streamlined Sales and Use Tax Agreement. The Court also did not apply the collection responsibility retroactively.

Many of our TPSA clients run small to medium-sized businesses that sell to customers in a number of different states (through 3rd party services, their own website or by other means). With our assistance and guidance, we can help these businesses navigate each of these state’s sales tax laws. Many states (like Ohio) have special taxes like a “Gateway Tax”, that provide an exclusion from tax of sales shipped into the state below a threshold amount.

Our CPAs are paying attention to this wide-reaching decision and how it might benefit local businesses “brick and mortar” stores by leveling the playing field with internet retail providers. We are paying close attention to how other states are tackling this topic, as well.

As always, we are pleased to discuss this new court decision with you to help protect your immediate business concerns while the broader case continues to shake itself out.