More Businesses Subject to State Economic Nexus

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Businesses may have to start looking at sales and use tax in a much different light. While the term “nexus” may not be the most commonly used word in your vocabulary, it is certainly one that may be about to make an impact. On June 21, 2018, the United States Supreme Court overruled the landmark case of Quill v. North Dakota. The overruling of Quill in the South Dakota vs. Wayfair case may have tax ramifications for your business. Quill provided that a company must have an actual physical presence in a state in order for a State to require an out-of-state business to charge that state’s sales tax. However, the case of South Dakota vs. Wayfair determined that physical presence is no longer needed to have “substantial nexus” in a state, as required by constitutional law.

Enacting Economic Nexus Standards

There are a number of states that have already enacted an economic nexus standard. These economic nexus standards usually hold a retailer liable to charge sales tax if they sell items into a state and meet certain thresholds.

As of today, 24 states have enacted economic nexus laws, notice & reporting requirements or announced their impending decisions on economic Nexus:

Alabama Minnesota

Colorado Mississippi

Connecticut North Dakota

Georgia Ohio

Hawaii Oklahoma

Iowa Pennsylvania

Illinois Rhode Island

Indiana South Dakota

Kentucky Tennessee

Louisiana Vermont

Massachusetts Washington

Maine Wyoming

How Businesses Can Prepare

Although there are currently only 24 states that have enacted or discussed statutes on economic nexus, the South Dakota vs Wayfair decision will most likely start a tumble effect resulting in many more states enacting economic nexus standards. If your business currently ships tangible personal property out of your home state, this ruling is more than likely going to affect you now or in the future. It is important that companies track all sales made in each state to further determine if they do in fact have nexus in a jurisdiction where they are not registered. Contact an Anders advisor with questions specific to your business.

Tax associate Connor J. Obermeier was a contributor to this post.

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