What Types of Businesses does Wayfair Apply To?
Many people view wayfair as being applicable to only businesses that sell goods over the internet. However, the ramifications of wayfair go beyond pure internet retailers. As a result, the wayfair decision has ramifications for services companies, as well as software companies. It’s holding can be applied in some form to just about any company that has interstate sales.
Tim Schuster: What type of businesses does Wayfair apply to?
Gary Bingel: Well, a lot of people are looking at the Wayfair case, as it may only apply to e-Commerce or your typical internet sales. And really, it does go far beyond those types of businesses. It applies to pretty much any business that has cross-border transactions or remote sales. That could include service companies, software service companies, any sort of app company. And even if all of your sales are exempt, let's, say, for resale, you may have an increased recordkeeping requirement, because since you have nexus in many more jurisdictions, you're going to have to keep track of those exemption certificates and many more jurisdictions than previously required.
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.
Businesses need to determine how Wayfair may apply to them by evaluating their nexus footprint, as well as where they should be filing based on any threshold (dollar threshold or transaction threshold) that is met.
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.