The U.S. Supreme Court recently ruled that online retailers are now required to collect sales taxes even in states where they have no physical presence. The ruling was aimed at leveling the competitive playing field between online and brick-and-mortar retailers.
If you do e-commerce and are stressing about how you'll be managing the task of remitting sales tax to 50 states and the District of Columbia, don't fret. The ruling in South Dakota v. Wayfair Inc. will have virtually no impact on your businesses.
That's because the Court's ruling is aimed at larger enterprises — those doing $100,000 or more in a specific state outside their own.
Essentially, if a business maintains a high-level of sales with consumers in another state, that business is now required to collect and remit sales tax to the other state. They call this "sales tax nexus." Previously, the retailer would only have to collect sales tax in the state where his business has a physical presence.
According to a news release from Oregon-based tax experts TTR, South Dakota's law has become a model for many other states.
South Dakota defines "sales tax nexus" this way...
"When a company sells more than $100,000 or has 200 or more separate transactions for the delivery of goods and services into South Dakota in a year, then a company has sales tax nexus and must collect sales tax now."
Sixteen states currently have "economic nexus" laws in place. Here are some some examples...
• Alabama - $250,000 or more in sales in a year.
• Arizona - $100,000 or more in sales in a year.
• Hawaii - $100,000 or more in sales in a year or 200 or more separate transactions in a year.
• Wyoming – $100,000 or more in sales in a year or 200 or more separate transactions in a year.
• Rhode Island - $100,000 or more in sales in a year or 200 or more separate transactions in a year.
• South Dakota - $100,000 or more in sales in a year or 200 or more separate transactions in a year.
The bottom line is that the Supreme Court ruling will hardly affect independent retail jewelers. However, if you do substantial online business with customers from a state outside of your own, it would be wise to consult a tax expert.
For more details on this issue, please check out TTR's news release here...