Business Update: Supreme Court Decision Expands Applicability of State Sales Tax
The United States Supreme Court recently issued a decision in South Dakota v. Wayfair, Inc. which will drastically change the applicability and imposition of sales taxes throughout the United States.
Prior to this decision, States could not enforce sales taxes against a business unless that business had a physical presence in the State. However, in Wayfair, the Court decided that while a business must have a significant connection to a State in order for it to impose sales taxes, a significant economic presence is enough to satisfy this requirement–and a physical connection is not necessary. This means that a State may now impose sales taxes on businesses that are not physically present in the State, if those businesses have a significant economic presence in the State. A business may have a significant economic presence in a State through numerous ways, including selling products online or otherwise offering services to residents of that State.
Since this decision was issued on June 21, 2018, fifteen States have already passed laws in accordance with it, with more States to follow. Going forward, businesses which engage in any business operations across state lines should ensure that they are complying with these new sales tax laws, or risk incurring significant consequences.