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 AdvocateDaily.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.