Abstract: Most states with a sales tax have enacted “economic
nexus” laws that expand the reach of their sales tax collection activities
beyond their borders. This article urges businesses to reassess their sales-tax
compliance obligations, especially as online transactions soar because of the
COVID-19 crisis.
Businesses should review sales tax laws
It’s been more than two years since the U.S.
Supreme Court ruled in South Dakota v. Wayfair that states may
require out-of-state sellers to collect sales and use tax even if they lack a
physical presence in a state. Since that time, most states that have a sales
tax have enacted “economic nexus” laws that expand the reach of their sales tax
collection obligations beyond their borders.
Many of these laws are similar to the one
upheld in Wayfair. It
applies to sellers that, on an annual basis, deliver more than $100,000
in goods or services into the state or engage in 200 or more separate
transactions for the delivery of goods and services into the state. Some states
have eliminated the number-of-transactions threshold, to avoid applying their
laws to small sellers, such as those that sell 250 items at $1.50 each.
Since the COVID-19 pandemic was declared,
online transactions have soared. If your business sells products or services in
states in which it lacks a physical presence, review the economic nexus laws in
those states and assess their sales-tax-compliance impact. Also, some states
have issued specific guidance on whether telecommuting employees temporarily
working in a state because of the COVID-19 crisis create nexus for an employer
who doesn’t operate in that state. We can help you explore and respond to these
matters.
© 2020