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Small Business Accounting & Technology

South Dakota v. Wayfair, Inc. |  New Sales Tax Rules for Online and Off-Line Sellers

Posted by Osita Egbukichi on Jul 2, 2018

Supreme Court rules that South Dakota can tax sales by out-of-state sellers. For many Oregonians, ‘Sales Tax’ is a dirty word that they’ve had the good fortune to be able to avoid. Small businesses, both local and out of state, factor this exception when they are looking at their projected revenue or viability and, for some, the survivability of their business. However, many may not be aware of the storm clouds that erupted outside the borders of our state; or, the rude awakening many small and personal businesses are in for in this new tomorrow of Sales Tax Nexus.

supreme court

Online Sales Tax Determination

Traditionally speaking, Sales Tax Law has not caught up to the rapid change and development of ecommerce, or businesses whose main bread and butter is made off delivering orders out of state. Previously, states did not possess a clear-cut outline of how to make these revenue streams taxable. Instead, they relied on physical presence laws which determined taxability based on a business’ physical location to help define the tax status of sales.

As you can imagine for businesses that process their orders online, it becomes very hard to fit them into that definition. Without a clear-cut obligation, as far as taxability is concerned, many businesses - including those in Oregon - have enjoyed the benefit of online sales and the loose definition of their taxability.

Online Sales Tax Moving Forward

In response, multiple states - South Dakota being the furthest along - launched suits against several companies, including Wayfair, Inc, Overstock.com, Inc, and Newegg, Inc to force a revision of these laws. On June 21st, an eventual decision was reached by the Supreme Court, ruling in favor of South Dakota and those states. It repealed the precedent of physical presence laws and gave states the authority to charge Sales Tax on sellers, even if they are out of state.

It goes without saying, this is an especially monumental decision for Oregon-based retailers and online distributors who have - until that moment - been free of the demands of Sales Tax. South Dakota and several other states have passed, or are moving to pass, new definitions of Sales Tax Nexus. South Dakota, specifically, no longer requires a physical presence. Instead, it's functioning off either Gross Revenue exceeding $100,000; or 200 separate transactions to purchasers located in South Dakota.

Adapting to Change

This new paradigm doesn’t just mean that there will be a greater expense on sales. Small business owners will need to find methods of tracking their sales in greater detail. If you happen  to be one of those business owners affected by this, or will be affected, you’ll likely need the assistance of software to help track liability, since it’s not only state tax - but city and local taxes also, which can be a quagmire just for one state. Luckily at ebs, we have the resources and experience to help you navigate your business through these changing waters; and assist you with getting ahead of the changes this ruling will require of your business.

Automate your sales tax calculations and filing

Don’t waste valuable time and resources on something that doesn’t make your business more profitable – especially when you can easily automate sales and use tax calculation and compliance within your existing QuickBooks, or eCommerce system. No more manually entering data or uploading rate tables and tax information! AvaTax works in the cloud, giving you a hands-free and worry-free way to manage compliance. No other sales tax automation software comes close to providing the superior features and peace of mind of AvaTax.

Learn More

Questions? Call 503-885-0776 to learn more about sales tax and sales tax automation!

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Topics: Sales Tax, QuickBooks Add-ons & Extensions, News & Resources, Taxes in Oregon, Avalara

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