How would states benefit if the Supreme Court sides with South Dakota?
The impending decision by the Supreme Court on economic nexus could impact many remote sellers. Vice President of Tax Policy and Government Relations Scott Peterson, explains what South Dakota and other states hope to gain if they are successful with their case in front of the Supreme Court on economic nexus.
"The point of South Dakota’s legislation, which they hope the Supreme Court will affirm in South Dakota v. Wayfair, is to get more retailers to collect South Dakota sales tax. They, like every other state in the country with the sales tax, has been nervous for a long time by the rapid growth in online sales. In a normal year online sales increase by double digits, versus non-online sales. This has recently been reinforced by a survey done by Forrester, where Forrester said by 2018 there could be 500 billion dollars in online sales in the United States. And this year the United States governmental accounting office released a study that said that states are missing out on 13.4 billion dollars in 2017. That amount of money makes the states very nervous. They hope that the Supreme Court’s decision will let them collect that money. They have what’s called a factor-based nexus standard of $267,000 a year. If you have that many sales into the state, you’re going to be subject to their business tax, not necessarily collection responsibilities, but again it’s something that companies of all sizes need to be aware of. Other states, again like South Dakota and Colorado have reporting requirements based on the number of sales you make, not necessarily the total amount of sales that you make. So you could make 200 sales into a state and be required to notify that state on what you sold and who you sold it to, so the state can go after the individuals that actually purchased your product. So this is something that is going to impact the smallest company that sells over the internet, and the largest company that sells over the internet. And on top of that, you may end up with a retroactive, the most painful thing possible, a retroactive sales tax liability that could either put you out of business or make it very difficult for you to succeed. So I can’t emphasize enough to start looking at automated solutions now, and not wait any longer to figure out what’s going to happen at the Supreme Court."