This article will explain what the Supreme Court Sales Tax Ruling on the case of South Dakota vs. Wayfair means and how it affects Cratejoy merchants.
What is South Dakota vs. Wayfair?
On June 21st, 2018, the Supreme Court ruled on the case of South Dakota vs. Wayfair in favor of South Dakota, which had enacted a law establishing sales tax nexus (obligation to remit sales tax) for any business that has sales of $100,000 or more in revenue, or 200 or more total transactions. This overturns the ruling found Quill Corp v North Dakota which required a physical presence in a state to establish nexus.
What does this mean for Cratejoy Merchants in regards to South Dakota?
In making this ruling, the Supreme Court affirmed South Dakota’s law which defined “substantial nexus” as having done over $100,000 in sales, or over 200 total transactions in the year. In making this ruling, the supreme court noted three protections made by South Dakota for out of state merchants:
- The law does not apply to companies that had limited business in South Dakota (the minimum thresholds of $100,000 or 200 transactions)
- The economic nexus rule did not apply retroactively
- South Dakota adopted the Streamlined Sales and Use Tax Agreement
What does this mean for Cratejoy merchants in regard to sales tax collection in other states?
Other states have passed similar laws to South Dakota. With this precedent now set, it is likely that other states with similar laws regarding establishment of substantial nexus for state sales tax collection, meaning that it is likely that you will have to collect sales tax if you meet similar thresholds in the course of a year in any of the states that have passed similar laws. Until these laws are ruled on, it is best to comply with the nexus laws established by each state.
If there is any uncertainty around your obligation to collect sales tax in a state that has established enhanced nexus, it is best to consult a tax professional.
You can find a list of States with economic nexus laws here.
What can I do now to prepare for this?
The most immediate action you can take is to make sure you understand your business presence in every state, both in terms of transactions and in terms of revenue collected.
If you believe that you meet the thresholds established in Wayfair and need to start to collect sales tax, Cratejoy Support has a workaround to manually enable sales tax at the state level. If you need to enable sales tax for any state, please submit a ticket.
What is Cratejoy doing to prepare for this?
We are in the process of evaluating the product to see if any enhancements need to be made to help merchants be compliant with enhanced nexus laws.