What is the Supreme Court Ruling?
On June 21, 2018, the United States Supreme Court issued the much-anticipated decision in the case of South Dakota vs. Wayfair, in favor of South Dakota. In this case, the Court ruled in favor of a South Dakota law that requires any out-of-state seller that delivers more than $100,000 of goods or services or has 200 or more transactions in South Dakota, on an annual basis, to collect sales tax from purchasers located in the state. This ruling overturned the long-standing physical presence rule set out in Quill Corp. v. North Dakota and set the foundation for all other states to enact similar laws if they don’t already have them.
What does this Supreme Court decision mean to me and my business?
In the short-term, the impact of the South Dakota law appears to have a mild-moderate effect on small online retailers. Smaller retailers who are currently single-state filers will face some challenges if they meet the sales thresholds, potentially leading to the need to automate their compliance efforts. In the long-term, however, we will likely see many more states enact laws similar to South Dakota. Alternatively, Congress may move forward with overarching legislation that could potentially expand the reach to a larger group of out-of-state online retailers.
Currently, a number of other states either have already exacted economic nexus laws or have court cases or legislation pending, all which were waiting on the outcome of the Wayfair case. These states include: Alabama, Arizona, Connecticut, Georgia, Hawaii, Illinois, Indiana, Louisiana, Kentucky, Maine, Massachusetts, Mississippi, North Dakota, Rhode Island, Tennessee, Vermont, Washington, and Wyoming.
What is Intuit doing?
Our in-house sales tax experts are closely monitoring all cases and legislation, along with the Intuit Tax Policy team. We will be continually educating our customers to assist them in determining in which states they are required to collect sales tax.
Is QBO compliant?
QuickBooks Online is already automating sales tax calculations for our new customers on accrual basis and we will continue to expand this service to our entire customer base over the next 2-3 quarters. In addition, QuickBooks Online also handles the filing requirements for most jurisdictions, and will expand to all taxing jurisdictions in the same time frame.
As states enact these economic laws, QBO will remain updated and able to support clients who qualify under the varying thresholds.
At this point in time, due to other issues in the Wayfair case, the injunction still stands in South Dakota and remote sellers are not yet required to collect sales tax for sales made into South Dakota.
The South Dakota Department of Revenue asks sellers to watch their webpage for updates, as collection will likely be required in short time: https://dor.sd.gov/taxes/business_taxes/remoteseller.aspx
Where can I learn more?
You can learn more about this ruling and related Sales Tax information from QBO experts:
- QuickBooks Resource Center: https://quickbooks.intuit.com/r/news/supreme-court-tax-decision/
- Intuit Tax and Financial Center: https://intuittaxandfinancialcenter.com/tax/small-business/south-dakota-v-wayfair-online-sales-tax/
You can learn more about automatic sales tax calculations with QuickBooks here: https://quickbooks.intuit.com/features/sales-tax/