July 31, 2018
The United States Supreme Court recently made a decision that will impact out-of-state sellers, including foreign inbound sellers.
The Supreme Court in South Dakota v. Wayfair Inc. overturned the Quill decision that implemented a physical presence requirement for the collection of sales tax on remote sellers. In 2016, South Dakota passed legislation that created an economic nexus standard for sales tax and did not require a physical presence. Over the course of the last two years, this legislation was challenged and ultimately heard by the US Supreme Court, which ruled in favor of South Dakota on June 21, 2018.
Under the South Dakota economic nexus standard, sales tax nexus is created if an out of state seller:
The US Supreme Court upheld these economic nexus standards, and the decision has prompted more states to now consider, introduce, and in some cases pass economic nexus standards similar to South Dakota’s rules. Therefore, foreign sellers now need to consider the sales tax impact of selling into the U.S. regardless of whether they have a physical presence or Permanent Establishment.
Due to the recent Wayfair decision, we recommend foreign companies selling into the U.S. review their sales tax compliance requirements in all states in which they do business.