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Throughout Europe, awareness of the sales and use tax implications of the U.S. Supreme Court’s June Wayfair decision remains relatively low and misconceptions regarding the ruling continue to grow. The fact is that the Wayfair decision represents a historic shift in how U.S. states can require remote sellers throughout the world to register for sales tax, charge the tax and start filing local sales tax returns. Neglecting the numerous sales and use tax rules changes the Wayfair decision is now stimulating can expose some European remote sellers to compliance problems and, worse, reputational risks.
Here are some of the most common misperceptions:
Whether or not a U.S. subsidiary can monitor and address the flood of sales and use tax rules updates streaming from dozens of states depends largely on the size of the operation’s tax function; some of those functions simply do not have the resources to monitor and manage all these changes. Regarding non-compliance repercussions, U.S. states do have the right to require foreign companies to collect and remit sales tax. While it remains to be seen how different states will handle enforcement, keep in mind that states could potentially pursue registered agents of the foreign company or place a tax lien on the non-compliant company’s U.S. bank accounts.
Tax functions in the European-based companies that conduct remote sales in the U.S. should look at the implications of Wayfair, track state-by-state sales tax requirement changes and determine if their sales are affected. Affected online retailers should consider taking the following steps:
Just as tax leaders in the U.S. will be monitoring the impacts of South Dakota v. Wayfair for some time to come, those based in the EU should be prepared to do the same. My colleagues and I will keep you updated as new developments unfold.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
The recent U.S. Supreme Court ruling in South Dakota v. Wayfair overturning the long-held Quill decision will dramatically change the landscape for online sellers when it comes to sales tax.
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