The supreme court finally handed out a ruling on South Dakota v. Wayfair Inc and it has provided some groundwork for how companies charge state tax for online sales. First, let’s look at the case and see how this came up in the first place.
The Buck Stopped There
Wayfair Inc., for those who don’t know, is a furniture and home decorating online marketplace. They sell couches and paintings and rugs and all sorts of odds and ends (plus they have a jingle that will be stuck in your head for days). Now they happened to be selling a lot of merchandise and a lot of it was going to South Dakota. Now the current rule in place stated that a company only had to charge state sales tax only if they had a physical presence in the state itself. Now that didn’t sit to well with South Dakota who felt that they were missing out on a lot of money.
So, South Dakota took Wayfair to court, the Supreme Court. After much deliberation, they came to the ruling that online retailers, even if they don’t have a physical presence in the state itself, must charge that corresponding state’s sales tax. This ruling was based on the current state of e-commerce. What was once a $180 billion industry has boomed to near $500 billion dollars. So how does it affect you? I’m glad you asked!
A Tax Face Lift
So now even if you have a business that sells product out of the state you manufacture in or distribute it from, you must follow state sales tax laws. This presents a whole new set of challenges and in some cases, reworks of your current systems. Where you now may have a simple checkout cart system it will soon need to evolve with calculations and reporting back to states the sales you make there. Luckily there are people that can help you.
Avalara provides a suite of compliance solutions that help thousands of companies save time and money, by working behind the scenes to calculate, collect, file, and remit taxes. To learn more about Avalara, give us a call at 855.913.3228 or email us at email@example.com!