The recent Supreme Court Decision in South Dakota vs. Wayfair, Inc. completely changed the landscape of state taxation for Sales and Use Tax, State Income Tax, and State Franchise Tax as it applies to business. The general reaction to this decision is that it only applies to internet sellers however, this is far from true. The Wayfair decision is being adopted by most states and will not only impact companies who sell via the internet, but also sellers who sell products and services through traditional sales channels.
The Wayfair decision overturned the Quill decision, which subjected companies to filing in states only if the company had sufficient “physical presence”. Under Wayfair, physical presence is no longer necessary. Wayfair established an economic/transaction threshold; $100,000 of business or 200 transactions. Any company generating revenue from a state in excess of either of these amounts is considered to have substantial nexus in that state. Having substantial nexus requires the company to register in that state and at a minimum collect and remit sales tax. Many states are also adopting this threshold to determine the requirement for filing Income or Franchise taxes. The effective date for this change will be October 1, 2018 for many states and January 1, 2019 for others. In either case, the time to act is now.
If you believe your business might be affected by this decision, please contact us and we will review your situation with you. (201) 327-0400
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