Companies selling online to U.S. customers until recently often did not have to pay sales tax in states where they had no physical presence. That has changed.
A U.S. Supreme Court ruling, South Dakota v. Wayfair, allows the collection of state sales tax from companies with a “substantial nexus” in a state, even if they don’t have a physical presence.
Although the ruling only applies to South Dakota, other states are revamping their laws to leverage the “substantial nexus” definition in some fashion. Forty-five states currently charge sales tax.
The new decision—widely referred to as “kill Quill”—overturns 1992’s Quill v. North Dakota, which said collecting sales tax in a state was unconstitutional unless a business had a physical presence in-state. The Quill ruling had become increasingly controversial over the years as the “mail order” sales it was written to address—amounting to just $180 million at the time—have been replaced by the internet commerce juggernaut.
Online retailers took in more than $409 billion in sales last year, and sales are expected to reach the half-trillion mark by 2019. Brick-and-mortar retailers, who have long complained that electronic retailers have an unfair advantage by not having to charge sales tax, hailed the new ruling as a victory.
Read the full blog article here.
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Susan Osborn, Director of Advisory Services, has been with Radius’ advisory group since 2010. She specializes in international tax setup and structuring in the Americas. She began her career as a corporate tax accountant at Raytheon, and worked in PwC’s tax practice for more than 13 years. She is based in Boston.