Sales tax ruling means new compliance burden for online retailers

Author(s): Advo​cateDai​ly​.com staff
The fol­low­ing arti­cle first appeared in Advo​cateDai​ly​.com,  Octo­ber 5, 2018.A recent U.S. Supreme Court rul­ing that South Dako­ta can impose sales tax on online pur­chas­es even if a busi­ness isn’t phys­i­cal­ly based in the state, will bring new com­pli­ance require­ments for some Cana­di­an online retail­ers, U.S. tax accoun­tant Bran­don Vucen tells Advo​cateDai​ly​.com.

The June 21 deci­sion, a chal­lenge to one state’s move to apply sales tax on inter­net retail­ers based else­where but sell­ing to cus­tomers in the state, revers­es a 25-year-old rul­ing that only applied sales tax if the sell­er had phys­i­cal pres­ence of prop­er­ty or employ­ees in the state — referred to as ‘sales tax nexus.’

The state’s tax leg­is­la­tion applies to sell­ers that, on an annu­al basis, deliv­er more than $100,000 of goods or ser­vices into the state or engage in 200 or more sep­a­rate trans­ac­tions for the deliv­ery of goods or ser­vices.

As Vucen, a prin­ci­pal of U.S. Tax IQ, explains, over time, as states have been attempt­ing to gen­er­ate more rev­enue, states have been try­ing to expand the def­i­n­i­tion of nexus.

“They’ve brought in oth­er kinds of eco­nom­ic nexus stan­dards, which is the case here — a sell­er did not have a phys­i­cal pres­ence but oth­er­wise has eco­nom­ic nexus by virtue of being an online retail­er and solic­it­ing cus­tomers in the state. So it real­ly is a ground­break­ing case and it does over­turn the pre­vi­ous phys­i­cal pres­ence stan­dard,” he says​.To request full arti­cle please con­tact us Con­tact Us