The Supreme Court of the United States’ decision in Wayfair, in June 2018, changed the landscape for sales and use taxes nexus for on-line retailers and remote sellers. Due to budgetary deficits the states are facing due to the downturn in the economy and the Covid-19 Pandemic, states will increase audit activity to raise money. Companies must be prepared and be proactive in order to avoid or reduce any state tax assessments.
The Wayfair decision lowered the bar in which a company has nexus with a state. Prior to Wayfair, a company needed a physical presence in the state to be required to collect and remit sales and use taxes. After Wayfair, states now require an economic presence, generally based on a threshold of sales into the state to create nexus with the state. Please note, even if a company does not meet the economic thresholds for sales or transactions, as the case may be, but has a physical presence in the state, then the company has nexus with the state because of the physical presence and must register for sales and use taxes in such state.
As a result of the Wayfair decision, all states that impose a sales and use tax, except Florida and Missouri, have adopted an economic nexus standard. The economic threshold for each state is reflected below. Note that Alaska, Delaware, New Hampshire, Oregon, and Montana do not impose a state sales and use tax.
There are a lot of questions regarding the thresholds amounts by each state. For example, are all sales counted, gross sales, or just taxable sales? Do I include sales in which the product is being resold by my customer? Do I include sales of my product that are made through marketplace facilitators or just direct sales to customers?
States have different meanings on what sales are included in the thresholds. Freeman Law can help taxpayers navigate state tax laws.
State-By-State Economic Nexus Thresholds
$200,000 (2019); $150,000 (2020);
$100,000 or 200 Transactions
$100,000 and 200 transactions
$500,000 and 100 Transactions