What Should My Business be Doing in Light of Wayfair?
Businesses need to determine how Wayfair may apply to them, evaluate their nexus footprint, and whether they need to file returns in additional states. Even wholesalers and distributors may find themselves having to collect exemption certificates from customers and/or in states where they didn’t previously. Companies also need to evaluate their systems to make sure they can generate any new information required by additional filings.
Tim Schuster: So what should my business do, you know, in light of Wayfair?
Gary Bingel: Well, the first thing you should do is be evaluating your nexus footprint. Every situation is different, and every company is different. However, there are some common strands and go through every business.First one is, you're going to want to see where you should be filing in, which thresholds you may be more likely to meet. Whether it's, the dollar threshold or the transaction threshold. And then you're going to want to make sure you're prepared for the increased registrations, increased audits, as well as the increased compliance that you may have to undergo. There's, gonna be a lot more information needed from your systems, and you're going to have to be prepared for those, as well as all the different tax rules in various states.
As a result of the Wayfair decision, states will be emboldened to enforce economic nexus not just in sales tax, but income tax and net worth taxes as well, and companies should prepare for additional audit activity and investment in their IT systems.
Currently approximately 30 states will adhere to Wayfair in some way. While some states enacted specific nexus statutes, others felt their current provisions were broad enough to include wayfair’s economic nexus thresholds.
While many view Wayfair as applying only to internet retailers, Wayfair extends beyond e-commerce to service companies and software companies with nexus in more than one jurisdiction, increasing record keeping and exemption certificates.
According to Wayfair, since a nexus footprint can now be established through economic contacts alone, businesses need to evaluate their nexus footprint in each state and evaluate their tax filing requirements and audit requirements.
The wayfair decision is the recent US Supreme Court decision out of South Dakota which overturned the physical presence requirement of Quill, and held that physical presence is not required to create nexus for sales tax purposes.
The Quill decision was the 1992 US Supreme Court decision out of North Dakota which held that some type of physical presence was required in order to create nexus with a state for sales tax purposes.