Plain and Simple: Bright Business Insights Spring 2018 | Page 7

HOW WILL YOUR BUSINESS BE AFFECTED BY SOUTH DAKOTA V. WAYFAIR ? What This Case Means For Multistate Sellers, Now & In The Future When should you charge a customer sales tax? If an Ohio-based In April 2018, the justices heard the oral arguments in the case. Rea’s business sells a product to an Ohio-based customer, whether or not you state & local tax team traveled to Washington, DC, to attend the charge sales tax would likely depend on what is being sold and how the arguments. The next step is for a preliminary outcome to be issued and customer plans on using it. But what if the same Ohio-based business an opinion drafted. If these differ, an additional court conference will sells a product to a customer in another state – would the business need be needed to change the result. An exact timeline for a ruling can’t be to charge the out-of-state customer that state’s sales tax? Well, that’s the determined, but you can expect to hear a decision in June 2018. question the U.S. Supreme Court is once again considering in the case of South Dakota v. Wayfair. Why The Wayfair Case Is Important The current U.S. Supreme Court ruling pertaining to sales tax is Quill Out-of-state businesses that have no physical presence in a state, v. North Dakota from 1992. In Quill, the court decided that for a state but have sales and transactions in that same state will be affected to impose a sales tax collection requirement, a seller would need to by this case’s outcome from a tax perspective. If the U.S. Supreme have some kind of physical presence in that state. Selling into that other Court upholds South Dakota law, then businesses would have to start state, with delivery from a common carrier, such as UPS, would not collecting sales taxes in that state if they pass the revenue or number be enough for the state to force a seller to collect that state’s sales tax. of transactions threshold. About eight states currently have a version That being said, the Quill case was decided at a time when brick and mortar stores staffed with local employees were the norm. The internet of this South Dakota law in place, and many more would add it if the law is upheld. had not yet taken off and nobody really paid attention to whether or If South Dakota loses, we can expect legislators to continue coming up not it made sense to purchase items online. Since then, states have with innovative ways to catch businesses with very little presence in become very aggressive in defining what “physical presence” is. For the taxing state. some states, presence can just be having a salesperson go to that state for one day. What It Means For You Now, to the current case! If you perform services or conduct business outside the state of Ohio, South Dakota created a law that requires sellers to register and way it turns out. We will stay up-to-date with the outcome of these collect sales tax in its state if that seller has either $100,000 worth of regulations and can help you to examine your activities in other states. transactions in South Dakota or 200 transactions (of any dollar amount) Give me a call to talk about your situation, and what this landmark case there. The South Dakota v. Wayfair case is about whether that rule will could mean for your business. be an acceptable alternative to Quill’s physical presence requirement. by: Chad Bice, CPA Regional President, Southeast Ohio 905 Zane Street, 2nd Floor Zanesville, OH 43701 [phone] [email protected] you will be affected by the Supreme Court’s decision, no matter which