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US Wayfair e-commerce ruling hits non-US retailers


US Wayfair e-commerce ruling hits non-US retailers

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 retailers into the Sales Tax net for the first time.

Wayfair changes the basis of tax to the location of the consumer, reflecting the rules of most countries' VAT and GST rules, including the EU.

The ruling effectively overturned the previous test, Quill (1992), 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.

Non-US retailer face multi-state taxing obligations

Quill meant that non-resident retailers selling to US consumers were largely exempt from having to charge state or local Sales Tax to their customers. This will cover not just South Dakota, which is expected implement the ruling in November, but other states - see table below - with similar laws which are now being modified to reflect the ruling requirements of the Wayfair case.

In addition to state Sales Tax, non-US Sellers will also have to consider the thousands of local Sales Tax jurisdictions. Companies will need to ensure they have adequate tracking of the exact location of their US customers, and what additional Sales Tax rates calculations, collections and filings will be required.

The Wayfair ruling included upholding a Sales Tax registration threshold of $100,000 or if the seller has more than 200 individual transactions in the state.

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

Economic nexus thresholds by State

As of 14 September 2018

States with economic
nexus
Effective date Thresholds triggering a collection obligation
($ and/or transaction volume)
Alabama Will be applied prospectively for sales made on or after 10.1.2018; statutory effective 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 Will be applied prospectively starting 10.1.2018. Statutory start date was 7.1.2018 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 More than $100,000
or
200 or more separate transactions
Michigan 9.30.2018 At least $100,000
or
200 or more separate sales
Minnesota 10.1.2018 10 or more retail 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
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 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 in the state
Washington 7.1.2017 (for B&O tax only)

 

 

 

10.1.2018 (for remote 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 WAMore 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
Sales of products*, admissions, or services delivered into the state
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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.