Retailers with large e-commerce channels and digitally native brands objected to the tax implications and increased business burden following the June 21, 2018 Supreme Court decision in Wayfair v. South Dakota . Taxes, calculations and remittances are inherently complex topics. To give our audience the most accurate information: ruling What does it mean what happens next what should you do next After the ruling, I sat down for an hour-long interview Friday morning with Scott Peterson, Avalara's vice president of government affairs and U.S. tax policy. Peterson manages all tax matters for Avalara's sales tax automation experts. Prior to joining Avalara, Peterson was the executive director of the Streamlined Sales Tax Administration Committee cited in the recent Supreme Court decision in Wayfair v. South Dakota. Peterson also served as Sales Tax Director for the South Dakota Department of Revenue for nearly 11 years. As one of the foremost experts on the case and its impact, I asked Scott to share his views on what retailers need to know, what's changing now, and before to make sure their business isn't hobbled by any new laws line expectations. What happened in Wayfair v. South Dakota? On Thursday, June 21, the U.S.

Supreme Court issued its opinion in South Dakota v. Wayfair et al. In a 5-4 vote, the court ruled that the standards in place since 1967 do not apply today. The previous criterion was physical presence. The rules states have always followed and retailers have been able to follow is that no state can compel a seller to collect that state’s sales tax unless the seller has a physical presence in that state. So, it's about connecting? Nexus might not even be the industry mailing list word. Nexus literally means connection. But I'm glad you used that word because that's where the justices want states and businesses to go. They wanted to focus more on the concept of connection, rather than the physical concept as the defining factor of connection. What they're saying in this case is that the way the states interpret their previous opinions, the 1967 State Bellas Hess v. Illinois and 1992 Quill v. North Dakota, is that the actual existence is a bright line. . If you have a physical presence, you must collect. You don't have to collect if you don't physically exist. But there are other examples, many of which are given in the case, where there is a link between the seller and the country even without the entity. These examples have produced unusual tax outcomes.

According to the decision in Wayfair v. South Dakota, this connection is the first volume. Is that correct? Right, that is it. The ruling would require any business that sells more than $100,000 or conducts more than 200 different transactions to South Dakota residents to collect South Dakota sales tax. The link here is sales. Of course, since 1992, states have gotten very creative in how they define connections. This volume example is only an up-to-date example. For example, six states have a law that says if you make a sale to that state—that is, if you sell a computer to the North Carolina Department of Revenue—that and separate bills require you to get sales for your sale to North Carolina Sales tax is levied on every other computer owned by anyone else in the Carolinas. Laws like these make it increasingly difficult to avoid connections. The business world has taken notice, too. More than 60 amicus briefs were filed in the case, all pointing to the arbitrary nature of each state's specific laws. Some states have indeed been increasing the burden on businesses. For example, two years ago, the federal court system, including the U.S.

Supreme Court, passed a Colorado law that gives the state the right to enforce that sellers who do not collect Colorado sales tax send the Colorado department a list of reported income. , which lists each of their customers and their total purchases during the previous calendar year. What is the purpose behind these country-specific laws? Well, the states' rationale is the same across the country: get more retailers to collect sales tax. Ideas that come up—like in Colorado or North Carolina, or now South Dakota—are just state-specific ideas. But in this business, once an idea in one state succeeds, other states adopt it.