Last month, the Supreme Court handed down its Wayfair Decision, a 5-4 decision in the case South Dakota v. Wayfair, Inc., allowing states to require out-of-state retailers to collect sales tax from customers, even if they don’t have a physical store or warehouse in the state, clearing the way for more sales tax revenue from internet purchases. The 5-4 decision overturned a 1992 Supreme Court precedent that effectively barred states from collecting such taxes. South Dakota’s law applies only to those businesses with more than $100,000 in sales, or at least 200 transactions, in South Dakota every year. Currently, 31 states already levy online sales taxes of some sort, leaving the remaining 19 states to get moving fast to impose taxes on online retailers.
So, what’s been happening in the weeks since the Wayfair Decision hit?
One knowledgeable source to find answers is the Tax Foundation, the nation’s leading independent tax policy nonprofit. Since 1937, the Tax Foundation’s principled research, insightful analysis, and engaged experts have contributed to a better understanding and implementation of tax policies. According to the Tax Foundation, within 48 hours of the Wayfair Decision, legislators from nearly every state contacted the Tax Foundation to ask what changes they should make to their sales tax to be able to collect tax on internet purchases.
Why? According to the Tax Foundation, some states may adopt laws that emulate South Dakota’s in every respect. Other states may adopt laws that adopt only some of the features, and that would likely be subject to further litigation. Some states may not act until their next regular legislative session, while others may never act. Congress may act to establish a minimum standard for states that wish to collect sales tax on interstate sales. A federal standard would create certainty for sellers and consumers and ensure that every state meets certain simplification guidelines. Until then, we’ll likely see more states seek the same authority as South Dakota, with some encountering legal challenges. Additionally, according to the Tax Foundation, some states will move quickly to enact laws resembling South Dakota’s to collect sales tax on internet purchases. Other states would need to make significant changes to their sales tax system to be able to collect, particularly large states that have resisted joining other states in adopting more uniform, simplified sales tax laws. Some states, such as New Hampshire, will likely never pass a sales tax.
The Supreme Court decision could put brick-and-mortar retailers on more of an even playing field with some of the online e-commerce leaders, although the online space will still enjoy some advantages. Still, some states are quite vocal on the Wayfair Decision.
Recently, New Hampshire Governor Chris Sununu joined Senate President Chuck Morse, House Speaker Gene Chandler, Attorney General Gordon MacDonald, Commissioners Taylor Caswell and Lindsey Stepp, and business owners from around the state in announcing New Hampshire’s plan to respond to the US Supreme Court’s decision in the case of South Dakota v. Wayfair, Inc. Governor Sununu announced that at the next Governor and Council meeting on July 11, he will ask the Council to approve a proclamation declaring a special legislative session. The proclamation will authorize the legislature to convene in a special session to consider legislation that will protect businesses from improper attempts by other states to force New Hampshire businesses to collect sales and use taxes. Additionally, the Governor’s office is working with legislative leadership and the Attorney General’s office to craft legislation. While final details are still being worked out, New Hampshire will erect every possible and constitutionally permissible legal and procedural hurdle to prevent other states from forcing New Hampshire businesses to collect sales and use taxes.
For today’s online retailers and distributors, expanding into new tax jurisdictions already brings with it complexities in managing sales tax.
With the Supreme Court’s latest decision on the matter of sales tax, the need is greater than ever to organize and streamline the tax compliance process. Sales tax automation tools are positioning to offer relief – and compliance – to online retailers and distributors looking to be in step with the latest ruling, with a focus on several areas.
- Eliminating tax-rate errors with automated VAT and sales-tax calculations.
- Ensuring compliance in all jurisdictions through automatic tax-law updates.
- Reducing costs by increasing efficiency and eliminating error-prone spreadsheets.
- Powering a comprehensive audit trail, with easy view of dates, changes, payments, and more.
- Performing address validation, jurisdiction determination, and rate calculations on-demand and in the cloud.
Is your business impacted? While the Supreme Court’s ruling is a big win for retailers with brick-and-mortar stores, like Target, it may not be good news for your business. If you need help meeting new compliance requirements and exploring robust sales tax management automation tools ideal for your business, contact CompuData’s sales tax automation specialists today.