The United States Supreme Court issued a ground-breaking ruling in South Dakota v. Wayfair Inc. that will drastically alter online retailer’s businesses. For decades, the U.S. has been following precedent set forth in Quill Corp. v. North Dakota, holding online distributors must have physical presence in a state to charge sales tax. This decision led to much debate because start-up store fronts felt it gave internet industries an unfair advantage to charge consumers less. The Supreme Court now believes they have rectified this decision and evened the playing field between internet and brick-and-mortar businesses.
In mandating sales tax for all internet consumers, the Supreme Court hopes it will bolster state’s revenue as well as benefitting the national economy. It’s no secret that e-commerce has developed into a significant part of the nation’s economy, which such a change will affect countless companies. Since states can choose how to create complying laws, online distributors may be forced to comply with a variety of different standards. This will force business to determine what state the retailer is ordering from and what that state’s tax law requires, so they charge accordingly.
In addition, online retailers may need to readdress their current policies, so they comply with new standards. In doing this, companies should look to review the marketing and pricing of products because these additional taxes may impact their overall sales. They should also evaluate the taxability of products in all jurisdictions, since many states policies have changed. For example, retailers could be required to register in new states, as well as file all the required returns and remittances within the time frame required. Companies may also need to update their terms and conditions for webstores and reassess their procedures for tax processing and accounting operations.