On 21 June 2018, the United States Supreme Court issued their opinion in South Dakota v. Wayfair, a decision that impacts all vendors and retailers trading in the United States.
What is the Wayfair decision?
The South Dakota case against Wayfair sets a precedent and implies that the absence of a physical presence of a business in a US state will not determine anymore that it is not subject to sales tax. As a result of the Wayfair decision, some foreign companies trading in the US and not established there may therefore be required to collect sales tax from their customers. This decision applies to all retailers, third-party sellers such as Amazon, wholesalers and any company making transactions in the USA.
Is your company subject to economic nexus?
Having a Nexus in an American state means that a company has a sufficient business presence to trigger the obligation to collect the sales tax from its local buyers and return it to the local tax authorities. A company with a physical presence in a state has a Nexus and is therefore subject to local sales tax. Following the Wayfair decision, the Economic Nexus is no longer only defined by physical presence but also by some transaction thresholds that vary according to the states.
Find out about your obligations
More than twenty American states currently have Nexus obligations and other states are in the process of joining them. South Dakota legislation, for example, defines a company has a Nexus if:
– It makes more than 200 transactions annually in this US state
– Has a GT $100,000 in gross sales in a year.
Find here the applicable thresholds of each state.
In addition to sales volume, it is important to find out the tax rates for the products you sell as they may vary according to category and state.
To check if your company has a Nexus and is subject to sales tax in a US state, contact ASD Group. Our experts can guide and advise you on the compliance of your company.
This article is intended for informational use only and does not constitute legal, financial or tax advice. For specific advice applicable to your business, please contact us.