How South Dakota v. Wayfair Could Affect Contractors

States are becoming more and more aggressive in their pursuit of sales and use tax nexus and forcing vendors to collect their tax. This could affect businesses in many different industries, from internet retailers to construction contractors. A sales/use tax case only seems to reach the US Supreme Court once every 25 years.  So, when it does, it has a tremendous impact on commerce.  The US Supreme Court recently heard such a case, South Dakota v. Wayfair.

What’s going on in South Dakota v. Wayfair?

South Dakota tried to force vendors to collect their tax if sales in their state exceed $100,000 or consisted of 200 or more transactions.  States have established similar laws recently trying to “encourage” companies to register to collect their tax, even though, based on current law, these laws are considered unconstitutional.  Wayfair, an organization that operates similarly to Amazon, chose to challenge the issue.  Their challenge quickly reached the US Supreme Court.  Some fear the Court may overrule the prior case, Quill, that helped establish current law that physical presence is required and there must be substantial nexus or contact with the taxing state.  If that happens, states will likely become more aggressive at collecting tax from companies that previously did not have to collect the tax.

How could this case affect the construction industry?

This will impact the construction industry in ways that may lead to more audits, more aggressive auditors, and an increase in the tax collected by vendors on items sold to contractors.  The difference of tax rates collected in Missouri may be significant to require more planning on the contractor’s part as to where they take title to such materials.  We have the expertise at Anders to help construction contractors in planning for such an occasion.

Who can help my company prepare for the effects?

Robert V. Willeford, Jr., CPA, Esq. is the Director + State and Local Tax at Anders, with over 20 years of experience in sales/use tax working for the government, industry, and public accounting.  He has been on both sides of the fence.  Robert is a licensed CPA and Attorney and would be a tremendous resource to help with tax planning from a state and local tax perspective. Contact Robert at rwilleford@anderscpa.com, or learn more about South Dakota v. Wayfair.