What Does Wayfair Mean to Businesses in General?
Since nexus can now be established through economic contacts alone, many companies will find they have nexus in many more states than they did previously. Businesses need to evaluate their nexus footprint and evaluate whether they need to file tax returns in additional states.
Tim Schuster:Gary, what does the Wayfair decision mean to businesses in general?
Gary Bingel: Nexus may now be established through just having sales in a state or a certain number of transactions. As a result, it is highly likely most businesses will have a much greater expanded footprint as far as their tax filing requirements, nor they're deemed to have nexus. Generally, they're going to have to start filing returns in a lot more states and that's gonna include more registrations, as well as increased audits. There's going to be much more required of their systems in order to extract that information. And they're going to have to deal with doing business in many more jurisdictions.
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.
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.
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.