Physical Presence Is Dead
If you’ve ever heard of the phrase “physical presence” in the context of sales tax nexus, well, after today that concept is basically dead. In the most important ruling in more than 20 years with regard to tax nexus. the U.S. Supreme Court has sided with South Dakota, ruling that physical presence, of any sort, is no longer required to register with a state tax department or collect their sales tax. In doing so, the Court overturned the Quill case which, until today, had been the gold standard on this issue.
What Does South Dakota’s Victory Mean To You?
If you sell products or services into other states, AND don’t file taxes in some of them, you should examine your situation for the possible impacts of this new ruling.
The threshold in the Wayfair case was $100,000 of sales into a state or 200 transactions. Some states already have similar provisions in their laws, and we expect most states will follow. Not all states will have the same rule and each state has different sales tax rules in terms of which products or services or buyers are taxable or exempt.
We will be provide you with additional information in the days and weeks ahead on action items that you should consider – including a risk study to look at the places where you are most at risk based on your particular products, examining taxability in those states, and either completing registrations there or voluntary disclosures.
By Joe Popp, JD, LLM (Dublin office)