What did the Supreme Court decide?
The Supreme Court handed down their decision in favor of South Dakota, which overturns Quill and the longstanding physical presence requirements for sales and use tax collection for online sellers, out-of-state merchants, and global companies selling to US-based customers.
What was the South Dakota v. Wayfair case about?
In 2016, South Dakota passed a law requiring remote sellers to register, collect, and remit sales tax if they meet the following criteria:
- $100,000 of annual gross revenue from the sale of tangible property, electronic products or services delivered into South Dakota; or
- 200 separate transactions per year in which there is a sale of tangible property, electronic products, or services delivered into South Dakota.
On June 21, the Supreme Court ruled in favor of South Dakota and overturned Quill. The Supreme Court viewed that these types of thresholds help to prevent discrimination against different size businesses from undue burdens on interstate commerce. States that do not already have similar thresholds in place will need to determine how to apply the new nexus standard.
How does this change remote sellers’ sales tax collection responsibilities?
The existing compliance burden will likely escalate significantly. Many companies have physical nexus in only a few states. By overturning Quill, companies could be required to collect and remit sales tax in up to 45 states. As a result, some companies may need to invest in new technology and processes.
What type of businesses will this affect?
Any business that sell goods remotely could be affected.
What should businesses be doing now?
Prepare for increased collection and remittance responsibilities by:
- Starting to gather data on gross revenues and/or the number of transactions that occur within states where the company sells remotely.
- Prioritizing states where the company has the greatest economic presence and creating a plan to register to collect and remit sales tax (e.g., via a marketplace, or with a hosted, or cloud-based, technology solution).
- Evaluating the financial statement impact of remote seller compliance.
- Reviewing invoicing processes and controls, as invoicing errors that occur after the decision is finalized likely will result in more significant customer satisfaction and cash flow risks.
Who can turn to for automated technology solutions?
Vertex is prepared to support you.
Vertex solutions are proven and ready to accommodate any new calculation and reporting requirements if the Supreme Court decides to overturn or significantly change the Quill decision. Vertex provides cloud and on-premise solutions that can be tailored to specific industries for every tax type.
For companies that may need to rapidly implement a solution, Vertex® Cloud Indirect Tax, could be the best option. Vertex Cloud is a SaaS solution that automates end-to-end sales and use tax processes from calculation to returns and remittance. With multiple services levels and flexible pricing models, Vertex Cloud meets the sales and use tax needs for businesses of all sizes. Vertex also offers over 120 integrations to major providers of e-commerce, procurement, CRM, ERP and other major financial systems.