Sales Tax Traps for E-Retailers

In the U.S., sales and use taxation is governed by the 50 states and the District of Columbia. Companies that make sales to customers in the U.S. are subject to sales tax regimes to the extent they have nexus with the relevant state. Nexus can be created either by having a physical presence (e.g., payroll, property, including a building or inventory, or agents) or an economic presence in the state. In its landmark 2018 decision in South Dakota v. Wayfair, the U.S. Supreme Court overruled the long-standing principle that physical presence in a state was required for a remote seller to have sales tax compliance obligations in that state. The court held that states may impose sales tax collection obligations on remote sellers whose sales exceed a monetary or transaction threshold ($100,000 or 200 separate transactions within the past or current year, respectively), without regard to physical presence of the business in the state. In the wake of the Wayfair decision, 43 U.S. states enacted economic nexus laws.

Source: BDO

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