E-Commerce Businesses Are Now Required to Collect Sales Tax

Category:

4 minute read

The e-commerce industry is booming worldwide and the way we shop has forever changed.

Our purchase decisions are no longer dictated by where we live but rather how fast we can get something delivered to our front doors. It is anticipated that by 2021 we will see a 246.15% increase in worldwide e-commerce sales, from $1.3 trillion in 2014 to $4.5 trillion.

Many of us choose to shop online because of the low prices and endless selections but until now, many of these e-commerce sales have been, essentially, tax-free.

In 1992, before the massive rise of e-commerce, a Supreme Court ruling called Quill Corp. v. North Dakota helped encourage the rise of internet shopping by adding an “interstate commerce clause” in The Constitution that allowed online retailers to sell outside of their state without charging customers a sales tax.

This 1992 ruling put brick-and-mortar competitors all over the country at a disadvantage because most online sellers don’t have a physical presence in every state.

Things have changed a lot since 1992 and on Thursday, June 21st, the Supreme Court reached a decision in South Dakota vs. Wayfair Inc. (spoiler alert: it was a big win for brick-and-mortar businesses as well as states that say they’re missing out on tens of billions of dollars of annual revenue).

What does South Dakota vs. Wayfair Inc. mean for my small business?

It depends.

This new law will affect your business if either or both of these apply:

  • You did more than $100,000 in annual sales in one state.
  • You completed more than 200 transactions in the current or previous calendar year.

If either of the above apply to you and you live in South Dakota, then you could be subject to a 4.5% sales tax.

Don’t live or sell products in South Dakota? Not so fast!

More than 40 other states had asked the Supreme Court to rule in favor of South Dakota, so these states will most likely pass similar laws in the next few months.

What should I do to comply?

There are over 10,000 state and local tax jurisdictions in the USA. The requirements vary. We recommend reaching out to your tax advisor to determine the best next steps for your individual business.

Additionally, consider getting updates from this WooCommerce tax blog company: TaxJar

2018-07-12T15:20:45+00:00July 11th, 2018|