For decades, a U.S. state could not require a seller of taxable goods and services to collect and remit sales tax on sales to in-state customers unless that seller had a physical presence of some sort in the state. The required “physical presence” could be temporary or sporadic in nature and did not apply only to sellers having a permanent establishment in the state.
On June 21, 2018, the U.S. Supreme Court, in South Dakota v. Wayfair, concluded that the physical presence was unsound and incorrect. In reaching this conclusion, the Court gave tacit approval to a South Dakota law mandating that all retailers with over $100,000 of sales into the state or 200 sales transactions to in-state customers collect and remit South Dakota sales taxes The abrogation of the physical presence requirement affects all companies selling more than a de minimis amount of tangible personal property, services, or even digital goods into the U.S. Over half the U.S. states now have laws or provisions similar to South Dakota’s and can require sellers without a physical presence to collect and remit state sales tax. Importantly, Wayfair does not provide different rules or carve-out foreign sellers making direct sales to U.S consumers or U.S. businesses. None of the states that have laws or provisions similar to South Dakota’s limit their scope to U.S.-based sellers.
In the six months since the decision came out, the landscape has changed significantly in a number of states and in many cases foreign sellers into the U.S. are still trying to determine the extent to which their businesses are impacted.
Please join professionals from KPMG’s State and Local Tax Practice in the United States as well as from KPMG International’s member firms as they discuss the Wayfair case and the potential implications for foreign sellers. The focus will be on practical information and suggestions on how you may wish to approach this for your business going forward.