Most of you are probably familiar with the internet company Wayfair, and if you watch any television (especially HGTV, like my wife), you’ve probably seen their commercials and heard their jingle. In fact, if you know what I’m talking about, you’re probably already humming the jingle “you got just what I need” in your head right now!
I can’t say I’ve ever visited their website, but their commercials and jingle have made me familiar with the Company and its name. Recently I became much more familiar with the Company as a court case involving it went all the way to the Supreme Court. The Court’s decision means that if you buy something from them, it will probably now be a little more expensive. In fact, in the near future, many of the things you buy on the internet will become more expensive. Why is that, you ask? Well, internet sales companies like Wayfair are now required to charge you sales tax at the time of your purchase, even if they are in a different state than where you live.
Wayfair, like many other companies, had been relying on an old court case (Quill v. North Dakota) that did not require them to charge sales tax in states in which they had no physical presence (e.g. corporate office or warehouse). So, Wayfair, which is located in Massachusetts, was not charging sales tax on the goods it shipped to customers in South Dakota because it had no physical presence there.
The State of South Dakota decided it was time to challenge the old principal under the Quill decision. They believe that the times have changed with e-commerce, and that, with all the states losing billions of legitimate sales tax dollars each year, it was time for a new standard: A standard based upon an “economic presence” in the state. South Dakota was not alone in the fight; it had the support of over 40 other states in its quest to get the standard changed. The court case became national news not only because of the historical precedence, but because it went all the way to the Supreme Court. In the end, the Supreme Court ruled 5-4 in favor of South Dakota and this new standard.
How does this change things going forward? Well, for starters, Wayfair – and any other businesses having essentially more than $100,000 in internet sales to locations inside South Dakota – now must charge sales tax to those customers on behalf of South Dakota. But even more importantly, other states are quickly following in patterning their own sales tax laws to rely on the new Wayfair case. In fact, our home state of Michigan just changed the sales tax law, modeling it after the Wayfair decision. There simply are too many sales tax dollars in play here: Before long, virtually every state in the country will tailor their sales tax laws to the decision.
So, maybe Wayfair has everything you need for your home, but if you are in a business with out-of-state internet sales, they probably are not going to have what you need to comply with new sales tax rules. It’s probably a good time to instead do a search for a good CPA firm. In fact, in Michigan CPA fees are still sales-tax-free!
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Meet Jim Valk, a fun-loving, introverted, active father of four and the fearless leader of #TeamJVTR. If you or your business need financial or tax counsel, count on Jim and his team to get the job done. At home and abroad, they stay up-to-date on tax-related matters for clients and companies living and doing business on multiple continents. Find out more about Jim and #TeamJVTR below!