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States with South Dakota–style economic nexus laws


economic-nexus-remote-sales-tax

Last updated 10.5.2018 to reflect the latest state information.

In the case of South Dakota v. Wayfair, Inc. (decided on June 21, 2018), the Supreme Court of the United States overturned the rule that a state cannot tax a business unless it has a physical presence in the state. The court found the defendants’ “economic and virtual” connections to South Dakota to be sufficient grounds for nexus, the connection with a state that triggers a tax collection obligation.

This expansion of state taxing authority could have far-reaching consequences. More than a dozen states had already adopted economic nexus provisions prior to the June 21 ruling, though most didn’t actively enforce them due to the physical presence rule. Many states linked the effective date of their policies to the South Dakota v. Wayfair ruling, or to possible future action by Congress.

Each of the following states is enforcing or soon will enforce its economic nexus laws, as shown in the chart below.

States with economic nexus laws

States with economic nexus

Effective date

Thresholds triggering a collection obligation ($ and/or transaction volume)

Alabama

Will be applied proactively for sales made on or after 10.1.2018; statutory start date was 1.1.2016

More than $250,000

and

additional activities

Colorado

12.1.2018

$100,000 or more                                         

or                                                                  

200 separate transactions

Connecticut

12.1.2018

At least $250,000

and

200 or more retail sales

and

systematic solicitation of sales in the state via the internet or other means

Georgia

1.1.2019

More than $250,000                                   

or                                                                  

200 or more retail sales

Hawaii

7.1.2018

At least $100,000                                         

or                                                                  

200 or more separate transactions

Illinois

10.1.2018

At least $100,000

or

200 or more separate sales

Indiana

10.1.2018

More than $100,000

or

200 or more separate transactions

Iowa

1.1.2019

At least $100,000

or

200 or more separate transactions

Kentucky

10.1.2018

More than $100,000

or

200 or more separate transactions

Louisiana

1.1.2019

More than $100,000

or

200 or more separate transactions

Maine

7.1.2018

More than $100,000

or

200 or more separate transactions

Maryland

10.1.2018

At least $100,000


or


200 or more separate sales

Michigan

9.30.2018

At least $100,000


or


200 or more separate sales

Minnesota

10.1.2018

10 or more sales totaling more than $100,000


or


100 or more retail sales

Mississippi

9.1.2018

More than $250,000

and

systematic exploitation of the market in the state

Nebraska

1.1.2019

More than $100,000

or

200 or more separate transactions

Nevada

10.1.2018 (if threshold is met on 10.1.2018, collection and remittance must commence 11.1.2018)

More than $100,000


or


200 or more separate transactions

New Jersey

10.1.2018

More than $100,000


or


200 or more separate transactions

North Carolina

11.1.2018

More than $100,000


or


200 or more separate transactions  

North Dakota

10.1.2018

More than $100,000

or

200 or more separate transactions

South Carolina

11.1.2018

More than $100,000

South Dakota

11.1.2018

More than $100,000

or

200 or more separate transactions

Tennessee

7.1.2017 (under an injunction until further notice)

More than $500,000

and

systematic solicitation of sales in the state

Utah

1.1.2019

More than $100,000

or

200 or more separate transactions

Vermont

 7.1.2018

At least $100,000  

or

200 or more individual sales transactions

and

systematic solicitation of sales from in-state customers

Washington

10.1.2018 (for remote transactions)

 

 

 

7.1.2017 (for B&O tax only)








More than $100,000


or


200 or more separate transactions

More than $267,000 of yearly gross receipts sourced or attributed to WA in 2017, $285,000 in 2018 

            
or


at least 25% of total yearly gross receipts sourced or attributed to WA


West Virginia

1.1.2019

More than $100,000

or

200 or more separate transactions

Wisconsin

10.1.2018

More than $100,000

or

200 or more separate transactions

Wyoming

7.1.2017 (under an injunction until further notice)

More than $100,000

or

200 or more separate transactions


South Dakota v. Wayfair, Inc. doesn't give states carte blanche

While the ruling does allow states to tax businesses based on economic and virtual connections, it doesn't necessarily give them carte blanche.

The Supreme Court found that “South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce.” These are:

  1. South Dakota affords small merchants “a reasonable degree of protection” from taxation. Remote vendors must have more than $100,000 in gross revenue from South Dakota sales, or 200 or more separate transactions of the same in the current or previous calendar year to trigger a tax collection obligation.
  2. The law ensures no obligation to remit the sales tax may be applied retroactively.
  3. South Dakota is a member of the Streamlined Sales and Use Tax Agreement, which reduces administrative and compliance costs by requiring a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and more. It also provides sellers access to sales tax administration software paid for by the state, and sellers that use such software are immune from audit liability.

States with remote sales tax policies at odds with any of the above could be vulnerable to legal challenges should they try to enforce them. But states with South Dakota–style economic nexus laws are well positioned.

It will take time for the full implications of the South Dakota v. Wayfair ruling to be felt. In addition, Congress could get involved; a bill that would prevent states from taxing most remote sales has already been introduced. Furthermore, measures that would expand state tax authority (e.g., the Remote Transactions Parity Act and the Marketplace Fairness Act) have long been on the table but held in committee.

In the meantime, businesses that sell in multiple states should track changing state nexus laws and develop a plan to ensure compliance. Find helpful resources here


Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.