Change Country

Tax & Assurance Guidance

Wayfair: A Year Later

Posted on October 1, 2019 by

Sue Tuson

Sue Tuson

Share This

It’s been over a year since the US Supreme Court’s ruling in South Dakota v Wayfair[1]overturned the long-standing physical presence standard for imposing a sales and use tax collection responsibility.  Wayfair overturned the requirement for a physical presence in a state that was established in the 1992 case, Quill Corporation v North Dakota[2].  Over the past year, almost all the states that impose a sales/use tax have adopted an economic nexus standard established by Wayfair.


As a reminder, the South Dakota standard that was upheld required remote sellers to collect sales tax if they had established economic nexus in South Dakota.  The standard adopted was a bright-line test of either $100,000 of sales or at least 200 transactions.  As most of the states have jumped on the economic standard bandwagon, it is important for businesses to monitor sales by state and the changing standards in the states were sales are occurring.  Businesses continue to struggle with compliance due to the fact that there is no one consistent standard applied across the various state taxing jurisdictions.  What is clear is that this change has impacted many businesses, not only the giant on-line retailers.

Foreign Impacts

Foreign businesses are subject to the same standards as domestic businesses when it comes to sales/use tax.  This means that foreign businesses that are remote sellers and meet the economic nexus standard will be responsible for collecting and remitting sales tax to the appropriate jurisdictions when selling to consumers.  If sales are being made B to B for resale, those sales will likely be exempt as long as the proper exemption certificates are obtained relieving the seller of any potential liability.

What should a business be doing to evaluate their sales/use tax filing responsibilities?

  • Start by identifying the type of sales transactions that are occurring B-B, B-C, drop-ship arrangements, SaaS
  • Source the sales to the taxing jurisdictions
  • Determine the nexus standard that applies to the jurisdiction, the date the nexus standard was adopted and whether or not the filing threshold has been met
  • Obtain the documentation for exempt sales
  • Consider the states with the larger exposure immediately to mitigate further exposure
  • Register where applicable and file returns, even if zero, to start the statute of limitations running
  • Be ready to answer customer questions if you begin collecting sales tax when in the past you did not

Sales tax is a gross tax on sales so it’s important to manage the risk associated with this type of tax.  To learn more, contact Clayton & McKervey.

[1] South Dakota V. Wayfair, Inc., Dkt. No. 17-494 (U.S. S. Ct. 21 June 2018)

[2] Quill Corporation v. North Dakota, SCt, 504 US 298; 112 SCt 1904; 119 L Ed 2d 91 (1992).

Share This

Sue Tuson

Shareholder, International Tax

As an international tax advisor, Sue helps businesses structure their operations globally to mitigate tax costs and maximize profits.

Related Insights

Is Immediate R&D Expensing on The Horizon?

For the first time since 1953, taxpayers are not allowed an immediate deduction for R&E expenses and instead must capitalize and amortize such expenses. On March 17, 2023 a stand-alone bipartisan bill was reintroduced which would allow immediate expensing of R&D. Learn what this means for taxpayers.

by Sarah Russell

Section 174 Capitalization is Here

To the surprise (and dismay) of taxpayers and practitioners, Congress has been unable to repeal or defer the requirement to capitalize and amortize research and experimental (R&E) expenses under Internal Revenue Code Section 174.

by Sarah Russell

Meals and Entertainment Rules for 2022 Versus 2023

Understanding meals and entertainment expense deductions can be confusing. See the chart below for a summary of the meals and entertainment rules for 2022 versus 2023.

by Clayton & McKervey

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content