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Supreme Court Ruling: Out-Of-State Retailers To Collect Sales Tax for E-commerce

*Addendum to the below article: More states taking action to pass laws and regulations to require sales tax collection by remote sellers. Find the updated list here: https://kelly-cpa.com/new-online-sales-tax-requirements/ 

The Supreme Court, on June 21 in South Dakota v. Wayfair, ruled in favor of South Dakota. This means that any e-commerce company or seller using platforms like Amazon, Etsy, or Shopify must now comply with South Dakota’s law.

The law requires all retailers (including e-commerce) to collect and remit sales taxes to South Dakota, regardless of physical location, if they meet specific sales thresholds there. The sales threshold will be met if the retailer meets or exceeds 200 separate sales transactions in South Dakota, or delivers goods and services (subject to sales tax) exceeding $100,000 annually to South Dakota.

In the past, the buyer of retail products has been responsible for the reporting and remitting of use tax on purchases if sales tax was not collected. The Supreme Court’s ruling now shifts the responsibility to the seller to collect the sales tax when the transaction occurs. Other states may soon adopt South Dakota’s new law when looking to modify their existing sales tax laws.

What does this mean to E-commerce retailers that ship products out of state? If your e-commerce business ships to South Dakota, you need to closely monitor sales to see if you meet these thresholds. We also suggest that your business monitor all e-commerce business by shipping location and stay current with all forthcoming possible changes to sales taxes in states that choose to use South Dakota’s law as a model.

For strategies or more information on how this ruling impacts your business, please contact Kelly CPA at (469) 857-0011 or [email protected]