US Missouri to tax foreign sales and marketplaces

The US state of Missouri is to become the last state operating a sales tax regime to impose taxing obligations on foreign, ‘out-of-state’ sellers and marketplaces. This will take effect from January 1, 2023.

This is on the basis of the 2018 South Dakota vs Wayfair Supreme Court ruling, which gave the green light to bring remote sellers into the tax net, even if they did not have a ‘physical nexus’ in the state – such as stocks, offices or employees.

Missouri will rely on the Wayfair ‘economic nexus’ ruling. If non-resident sellers make sales above USD 100,000 per annum, they must register with the tax office in Missouri to start reporting and paying state sales tax. This also applies to out-of-state marketplaces whose combined sales for all their third-party merchants exceed the same threshold. They will be required to deduct the sales tax element of payments they manage for their sellers, and remit directly to the Missouri tax authorities.

US sales tax Wayfair ruling and foreign sellers

On 21 June 2018, the US Supreme Court introduced a new ‘economic nexus’ test to determine if out-of-state online retailers are responsible for charging Sales Tax – South Dakota vs Wayfair, Inc (2018). The result will drag many non-US online and concession retailers into the US sales tax net for the first time.

Wayfair changes the basis of tax to the location of the consumer, even if the vendor is not resident in the state, reflecting the rules of most countries' VAT and GST rules, including the EU.

The ruling effectively overturned the previous test, Quill (1992) Supreme Court ruling on this issue, which limited the obligation to charge state or local sales tax to retailers with a physical presence in the states – which could be interpreted by states as employees or even just visiting sales people.