Does the Supreme Court’s Decision on Nexus Affect Your Business?

Recently the US Supreme Court ruled that a company’s physical presence within a state for collecting sales tax was "unsound and incorrect." It deemed that physical presence was an arbitrary distinction and provided remote sellers an unfair competitive advantage over the companies in the local marketplace by not charging sales tax to their customers. The bottom line: States can impose sales tax on out-of-state transactions.

Does this recent ruling affect your business? If you sell products for resale or for use in manufacturing to produce a saleable item, your sales are generally exempt from sales tax. You’ll probably need customers’ sales tax license numbers, but nothing has changed with respect to charging and collecting sales tax.

However, if you do sell items for direct use by out-of-state customers, the new nexus ruling could mean big changes. States are passing laws that will make charging sales tax a requirement if the number of sales transactions or sales dollar amount exceeds those set up the by state.

You will need to review sales by state for the prior year to obtain both an amount and a transaction count. This is a starting point for registering in the states to which you sell. Your accountant can provide guidance.

Sales tax may be a single rate for the state (e.g., Michigan) or the rate may vary by zip code (e.g., in addition to state sales tax, California has over 2,500 cities, counties, and special districts that collect a local sales tax). The good news is that PowerShift includes tools to simplify the collection of sales tax and on the periodic submission of a sales tax document to states.

If your business ships taxable items, contact the Qantel Helpdesk to review your current sales tax setup and to discuss solutions to address anticipated sales tax issues.