Gina Pizzo, Managing Director
Laurie Wik, Senior Director
Craig Beaty, Managing Director
Greg Abbott, Senior Director
August 7, 2018 / North America
WHAT DO YOU NEED TO KNOW?
National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753
Quill Corp. v. North Dakota, 504 U. S. 298. A remote seller was obligated to collect a state’s use tax if it had the required in-state “physical presence.”
States began to reimagine “physical presence” with statutory and regulatory innovations.
South Dakota v. Wayfair, Inc., No. 17-494. The US Supreme Court’s recent decision has removed the “physical presence” requirement entirely.
Congress may yet act to enact federal law that reinstates the old “physical presence rule” or establishes another type of “bright line” for requiring remote sellers to collect tax. In the meantime, states and remote-sellers now face a brave new world, where the “physical presence rule” no longer exists and decades of case law and administrative rulings are of little or no guidance. While the final acts in the Wayfair saga continue to play out in the South Dakota Supreme Court, many observers expect the South Dakota economic nexus law which was partially tested in Wayfair to be held constitutional. In anticipation, almost half the states have already passed economic nexus legislation that will force a reckoning for different types of sellers to this “Wayfair Hangover.”
HOW WILL IT AFFECT YOU?
This decision will affect all types of remote sellers but will likely impact entrepreneurs and small to medium enterprises (SMEs) most heavily.
Individual states have always decided what and how much to tax, but the rules for when a remote seller must collect a state’s tax from an in-state customer have been controversial over many decades. With the Wayfair decision, one more barrier to a state’s ability to reach a remote seller has now been swept away. Inevitably, most if not all states may eventually impose legislation which enables enforcement of collection of state tax by remote sellers, a move expected to substantially increase their respective state revenues. These are the key questions every company should be asking themselves right now:
WHAT CAN A&M TAXAND DO FOR YOU?
There are more developments to be expected from the Wayfair case. US Congress could act and in effect, challenge the South Dakota vs. Wayfair ruling or the decision could be deemed constitutional. Either way, these impacted companies should start preparing for either outcome.
With Alvarez & Marsal Taxand’s multiple locations across the country, our team is fully equipped to guide and support companies as they navigate the possible taxation on e-commerce sales by assisting with:
To learn more about our services, visit: https://www.alvarezandmarsal.com/expertise/tax