Wayfair vs South Dakota

South Dakota v. Wayfair — the tax consequences of interstate e-commerce sales and the significance of a re-seller certificate

South Dakota v. Wayfair, Inc has become an iconic case study as well as the gold standard for any tax exemptions or sales tax levy, particularly when the sale occurs outside of the ‘home state.’

A ‘home state’ is defined as the state in which a company is registered to trade for sales tax purposes. Consider the state of New Jersey or any of America’s 50 states. However, if a company wishes to trade outside of its native state – in this example, New Jersey – it must meet particular economic levels, which are now known as the South Dakota v. Wayfair economic standards, thanks to a Supreme Court decision.

The original judgment Quill Corporation V. North Dakota has been overturned, and economic threshold limits and nexus requirements have been replaced.

The Supreme Court decided that new technological improvements warranted a re-examination of the original legislation. The volume of interstate transactions via electronic channels, notable purchases from Internet sellers, has expanded quickly since the Quill decision in 1992, resulting in revenue losses for the states.

Following the verdict, many states enacted ‘Kill Quill’ legislation to follow the Supreme Court’s decision on sales tax collection from out-of-state providers.

The word ‘Nexus’ was coined, and if a company has no physical presence in a state but has a demonstrable nexus – either financially or otherwise, such as through workers, sales reps, or other means – the company must pay sales tax.

The Supreme court judgment based on South Dakota V. Wayfair was implemented by nearly all 50 states as below – building a solid foundation for remote sales tax frameworks. Businesses with a local permanent establishment, or ‘nexus,’ in a state’s territory are generally permitted to impose a sales tax. This usually refers to state workers and/or properties. A taxable nexus can also be triggered by having a significant commercial tie to a state.

Alabama – AL – Alabama nexus threshold: $250,000 in sales only

Alaska – AK – Alaska nexus threshold: $100,000 in sales or 200 transactions

Arizona – AZ – Arizona nexus threshold: $100,000 in sales only

Arkansas – AR – Arkansas nexus threshold: $100,000 in sales or 200 transactions

California – CA – California nexus threshold: $500,000 in sales only

Colorado – CO – Colorado nexus threshold: $100,000 in sales only

Connecticut – CT – Connecticut nexus threshold: $100,000 in sales and 200 transactions

Delaware – DE – Delaware does not have a state sales tax

Florida – FL – Florida nexus threshold: $100,000 in sales only

Georgia – GA – Georgia nexus threshold: $100,000 in sales or 200 transactions

Hawaii – HI – Hawaii nexus threshold: $100,000 in sales or 200 transactions

Idaho – ID – Idaho nexus threshold: $100,000 in sales only

Illinois – IL – Illinois nexus threshold: $100,000 in sales or 200 transactions

Indiana – IN – Indiana nexus threshold: $100,000 in sales or 200 transactions

Iowa – IA – Iowa nexus threshold: $100,000 in sales only

Kansas – KS – Kansas nexus threshold: $100,000 in sales only

Kentucky – KY- Kentucky nexus threshold: $100,000 in sales or 200 transactions

Louisiana – LA – Louisiana nexus threshold: $100,000 in sales or 200 transactions

Maine – ME – Maine nexus threshold: $100,000 in sales only

Maryland – MD – Maryland nexus threshold: $100,000 in sales or 200 transactions

Massachusetts – MA – Massachusetts nexus threshold: $100,000 in sales only

Michigan – MI – Michigan nexus threshold: $100,000 in sales or 200 transactions

Minnesota – MN – Minnesota nexus threshold: $100,000 in sales or 200 transactions

Mississippi – MS – Mississippi nexus threshold: $250,000 in sales only

Missouri – MO – Missouri nexus threshold: $100,000 in sales only

Montana – MT- Montana does not have a state sales tax

Nebraska – NE – Nebraska nexus threshold: $100,000 in sales or 200 transactions

Nevada – NV – Nevada nexus threshold: $100,000 in sales or 200 transactions

New Hampshire – NH – New Hampshire does not have a state sales tax

New Jersey – NJ – New Jersey nexus threshold: $100,000 in sales or 200 transactions

New Mexico – NM – New Mexico nexus threshold: $100,000 in sales

New York – NY – New York nexus threshold: $500,000 in sales and 100 transactions

North Carolina – NC – North Carolina nexus threshold: $100,000 in sales or 200 transactions

North Dakota – ND – North Dakota nexus threshold: $100,000 in sales only

Ohio – OH – Ohio nexus threshold: $100,000 in sales or 200 transactions

Oklahoma – OK – Oklahoma nexus threshold: $100,000 in sales only

Oregon – OR – Oregon does not have a state sales tax

Pennsylvania – PA – Pennsylvania nexus threshold: $100,000 in sales only

Rhode Island – RI – Rhode Island nexus threshold: $100,000 in sales or 200 transactions

South Carolina – SC – South Carolina nexus threshold: $100,000 in sales only

South Dakota – SD – South Dakota nexus threshold: $100,000 in sales or 200 transactions

Tennessee – TN – Tennessee nexus threshold: $100,000 in sales only

Texas – TX – Texas nexus threshold: $500,000 in sales only

Utah – UT – Utah nexus threshold: $100,000 in sales or 200 transactions

Vermont – VT – Vermont nexus threshold: $100,000 or 200 transactions

Virginia – VA – Virginia nexus threshold: $100,000 or 200 transactions

Washington – WA – Washington nexus threshold: $100,000 in sales only

West Virginia – WV – West Virginia nexus threshold: $100,000 or 200 transactions

Wisconsin – WI – Wisconsin nexus threshold: $100,000 in sales only

Wyoming – WY – Wyoming nexus threshold: $100,000 in sales or 200 transactions

Why was the case Quill Corp vs North Dakota in 1992 has been so important to sales and use tax legislation?

The case was decided in 1992, and it set a precedent that retailers must collect sales tax on products they sell to customers. This meant that Quill Corp could not avoid collecting state sales taxes on items that were sold in North Dakota.

What is Nexus and Wayfair?

Nexus is the standard for establishing a physical presence in another state. Wayfair Inc., an online retailer, did not have nexus in North Dakota so it could not collect sales tax on goods it sold in North Dakota. This case is important because it established a precedent that online retailers must collect the state sales tax on goods they sell to customers.

What are the implications of the Supreme Court wayfair decision to businesses states and consumers?

The wayfair decision is significant because it will establish a precedent for similar cases in the future. If Wayfair had not won its case, then other retailers would have been forced to collect sales taxes on all products they sold in the state. This would have forced businesses to charge taxes on goods that were being shipped from outside of the state, even if it was not profitable for them. The Supreme Court decision will likely cause a ripple effect across the country as other states and retailers try to figure out how to comply with it.

Wayfair vs South Dakota

South Dakota v. Wayfair — the tax consequences of interstate e-commerce sales and the significance of a re-seller certificate

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