Sales Tax Compliance for International Businesses

July 31, 2018 | Article

By Aaron Boyer, CPA and Shannon Smith, CPA

The United States Supreme Court’s decision in South Dakota v. Wayfair will impact out-of-state sellers, including foreign inbound sellers. Understanding how sales tax reform impacts your organization’s international operations is essential to ensure compliance.

The Impact of the Supreme Court’s Wayfair Decision
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:

  1.  Makes sales into South Dakota of at least $100,000 in the prior or current year, or
  2. If the taxpayer engaged in 200 or more separate transactions in the state.

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.

Learn to identify your sales tax risks.

The Impact of Wayfair on International Business
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.

The Wayfair decision has changed the sales tax landscape and is impacting international business operations.

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