Internet Sellers May Be Liable For Multiple State Sales Taxes

 The responsibility for collecting sales tax for internet merchants [and those others selling and shipping products out of their home state] changed in 2018 with the U.S. Supreme Court decision, South Dakota v. Wayfair. This case held that states could require out-of-state (or remote) businesses to collect sales taxes even without a physical presence.

This decision added to the physical presence test an additional economic nexus test that allowed states to set standards for the total sales and/or number of total transactions of an out of state merchant that would trigger a sales tax collection requirement.  The states responded quickly with new remote sales tax requirements, resulting in a complex patchwork of requirements with wide variation.

For example, states established different monetary and transactional (or economic nexus) thresholds exempting some small businesses from remote sales tax requirements and different rules for calculating those thresholds.

This adds to the complexity of interstate commerce and e-commerce when it comes to sales tax, as if sales tax rules for your own state are not already hard enough to navigate.

The chart below from GAO, gives an overview of the sales and transaction numbers each state has established which require out of state sellers that don’t have physical nexus to collect and submit taxes on sales shipped into their state.