New sales tax rules for remote (online and off-line) sellers

South Dakota succeeds in long-standing debate over sales tax

The Supreme Court has ruled in favor of South Dakota, granting the state authority to impose sales tax obligations on out-of-state transactions. What does that mean for remote sellers and how will it impact their business? Here’s a look at how the court’s decision paves the way for a new world for sales tax.


What remote sellers need to know

What does the decision mean for out-of-state sellers?

If you sell into states where you’re not registered to collect and remit sales tax, economic nexus can change your tax obligations. Rather than require a physical presence in a state, economic nexus is based entirely on sales revenue, transaction volume, or a combination of both.

How do I know if I’m on the hook for sales tax in South Dakota?

Review your sales transactions carefully. To trigger economic nexus in South Dakota, a remote seller must have $100,000 in sales of tangible personal property, electronically transferred products, or services delivered into the state, or 200 separate transactions of the same delivered into South Dakota in the current or previous calendar year.

How soon should I begin collecting sales tax?

The U.S. Supreme Court decision places requirements on the South Dakota Supreme Court that will clearly take weeks to complete. There will be no immediate collection enforcement. 

What other states should I watch for?

South Dakota was the first to get permission from the court, but several other states with economic nexus rules will follow its lead (see map below). Each state has a different start date and sales/transaction requirements that trigger nexus. Expect to see more states jump on board.

 

More questions? Read our full FAQ (download PDF)


Economic nexus thresholds


States with economic nexus
Effective date
Thresholds triggering a collection obligation ($ and/or transaction volume)
Transaction included in threshold test
Alabama

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

1.1.2016

More than $250,000
and
additional activities
Retail sales of TPP* delivered into the state
Connecticut 12.1.2018 At least $250,000
and
200 or more retail sales
and
additional activities
Retail sales of TPP* delivered into the state
Georgia
1.1.2019 More than $250,000
or
200 or more retail sales
Retail sales of TPP* delivered into the state electronically or physically
Hawaii 7.1.2018 At least $100,000
or
200 or more separate transactions
Retail sales of TPP*, intangible property, or services used/consumed or delivered in the state
Illinois 10.1.2018
At least $100,000
or
200 or more separate sales
Sales of TPP* or services in the state
Indiana 10.1.2018
More than $100,000
or
200 or more separate transactions  
Sales of TPP*, electronically-transferred products, or services delivered in the state
Iowa 1.1.2019 At least $100,000
or
200 or more separate transactions
Iowa sales
Kentucky 7.1.2018 More than $100,000
or
200 or more separate transactions
Sales of TPP* or digital property delivered or transferred electronically into the state
Louisiana Start date to be determined More than $100,000
or
200 or more separate transactions
Sales of TPP*, products transferred electronically, or services delivered into the state
Maine 10.1.2017 More than $100,000
or

200 or more separate transactions
Gross revenue from sales of TPP*, electronically-transferred products, or taxable services delivered into the state
Minnesota Start date to be determined Makes 10 or more retail sales totaling more than $100,000
or
100 or more retail sales
and
systematic solicitation of sales in the state
Retail sales from outside Minnesota into the state
Mississippi 12.1.2017 More than $250,000
and
systematic exploitation of the market in the state
Sales into the state
North Dakota 10.1.2018 More than $100,000
or

200 or more separate transactions
Sales of TPP* and other taxable items delivered into the state
South Dakota
5.1.2016 (under an injunction until further notice) More than $100,000
or

200 or more separate transactions
Sales of TPP*, electronically-transferred products, or services delivered into the state
Tennessee 7.1.2017 (under an injunction until further notice) More than $500,000
and
systematic solicitation of sales in the state
Sales into the state
Vermont 7.1.2018 At least $100,000
or

200 or more individual sales transactions
and
systematic solicitation of sales from in-state customers
Sales into the state
Washington 7.1.2017 (for B&O tax only) 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
Retail sales into the state
Wisconsin 10.1.2018 More than $100,000
or

200 or more separate transactions
Sales of taxable products and services
Wyoming 7.1.2017 (under an injunction until further notice) More than $100,000
or

200 or more separate transactions
Sales of TPP*, admissions, or services delivered into the state

*TPP: tangible personal property


Hear what the experts are saying

Avalara's Vice President of U.S. Tax Policy and Government Relations, Scott Peterson, and tax expert and partner at Peterson Sullivan LLP, Rachel A. Le Mieux, CPA, CM, offer their advice.

Will remote sellers have nexus in all states?

What do you tell controllers and CFOs about their sales tax obligations?

 

Use the South Dakota v. Wayfair filter to watch more expert videos and get answers to the following questions and more:

  • Could other states follow South Dakota's lead?
  • What can out-of-state sellers do now to prepare?
  • Why should companies automate sales tax?

Ask the experts

View our on-demand Q&A forum with tax experts Scott Peterson and Rachel LeMieux, CPA, CM.

From our blog

Read more about the Supreme Court ruling.

Frequently asked questions

Read our most frequently asked questions and answers in a one-page PDF.

Overview

Read our one-page overview PDF.

Webinar series

View our webinar series on all things sales tax.


Avalara can help you

Avalara's Tax Advisory Services team can help. Our group of experts can help you determine where you have nexus, help you register in new states and jurisdictions, and navigate the full range of sales tax laws.

 

 

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