Leading Sales Tax Expert, Charles Maniace, Comments on South Dakota v. Wayfair Supreme Court Decision

Charles Maniace
June 21, 2018

On what was easily the most anticipated day in sales tax history, the Supreme Court did what many experts thought they would, ruling five to four in favor of South Dakota’s right to require businesses to collect and remit sales tax on all sales, including e-commerce, even if they don’t have people or property in the state.

In so doing, the Court ushered in a new era for sales tax, overruling Quill Corporation vs. North Dakota, a decades-old legal precedent. This ruling opens the door for governments to collect more than $8 billion dollars in tax from e-commerce sales that were previously off limits.

(Join us for a Live Expert Q&A Web Event on Wayfair vs South Dakota next week.)

We asked our resident sales tax guru and the head of our regulatory analysis team, Charles Maniace, for his initial reactions. Here’s what Chuck had to say:

“We are officially in a new era of sales tax. What we have considered to be foundational principles that define where businesses must collect and remit sales tax, are now entirely out the window. States now have almost a blank slate on which to write, and businesses will face a wave of new rules for tax compliance.”

There is, however, still a standard for when businesses will have to charge and remit tax: a ‘substantial nexus.’ What does and does not qualify as substantial nexus will be defined over the next few years, but what we do know is that ‘substantial’ no longer means ‘physical,’ and that’s a huge change.”

What do e-commerce sellers need to know?

“Any business that sells through e-commerce should pay close attention to state rules, especially in the 20 states that have introduced the same or similar rules as South Dakota. Businesses that sell through e-commerce channels will need watch each state in to which they sell goods for new laws that are sure to come quickly, and they will have to monitor whether those states’ will be litigated under this revived standard set by Complete Auto Transit, Inc. v. Brady and Pike v. Bruce Church Inc.”

What should we expect from the states now?

“States now have the ability to articulate that they have a reasonable standard to establish whether a business has substantial nexus that would require it to pay sales tax. In order to pass this standard, the rule must be reasonable and tax compliance must be manageable. The Court was clear to point out that South Dakota created a standard that does not burden commerce. They have a fairly simplified and uniform sales tax structure, their nexus law excludes small sellers, and as a Member State of the Streamlined Sales tax Agreement, they provide taxpayers with affordable software solutions.”

What role will software play moving forward?

“In today’s ruling, the Supreme Court discusses software as a means for easing the burdens of sales tax on businesses of all sizes, which seemed to be a key factor in the ruling. It’s clear the court appreciated the nature of the South Dakota rule, which set a clear threshold for substantial presence and simplified its sales tax regime, including years of work as a member of the streamlined sales tax initiative, of which Sovos has been a part of for more than a decade. This ruling makes it clear that software is an important part of making sales tax compliance manageable and affordable, and as the ruling mentions, many reliable and affordable solutions are currently available from vendors like Sovos. This ruling should drive further adoption of software, particularly among smaller businesses that have largely flown under the radar until now.”

What’s next in the regulatory environment?

“We’ll likely see states quickly enacting existing rules and drafting new ones, but congress is the wild card. Everyone is waiting to see if they will step in to create a standard, which they have a right to do, or leave it to the states.”

Stay tuned for more news, analysis and resources from Sovos. And, sign up now for our upcoming webinar that will outline all the impacts and what’s next for e-commerce sales tax

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Charles Maniace

Charles Maniace is Vice President – Regulatory Analysis & Design at Sovos. An attorney by trade, Chuck leads a team of attorneys responsible for all the tax and regulatory content that keeps Sovos clients continually compliant. Over his 14 year career in tax and regulatory automation, he has given talks and presentations on a variety of topics including The Taxation of High Tech Transactions, The Taxation of Remote Commerce, The Regulatory Implications of Brexit, The Rise of E-Audits, Form 1042-S Best Practices and Penalty Abatement Practices for Information Returns. Chuck is a member of the Massachusetts Bar and holds a B.S. in Business Economics from Bentley College, a J.D. from Boston University School of Law, and an LL.M in Taxation from Boston University School of Law.
Share This Post

EMEA VAT & Fiscal Reporting
September 17, 2019
Why Storage of Electronic Invoices in the EU Gets Complicated Quickly

It’s very possible that US companies are breaking laws governing storage of electronic invoices in the European Union without realizing they’re putting themselves at risk for financial penalties.  The EU is an entity that, as the Brexit debate has shown, can frustrate and baffle its own citizens. In the US, the EU is frequently misunderstood. […]

Tax Information Reporting United States
September 16, 2019
6 Reasons You Should Attend the 2019 GCS Intelligent Reporting Summit

The tax information reporting event of the year is coming in October! Sovos will present the 2019 GCS Intelligent Reporting Summit in San Antonio Oct. 28-30. You can’t afford to miss it! Here’s why:  NEW! Unclaimed Property Regulations: De-mystify unclaimed property reporting and learn how to protect your company from risk you might not even […]

Tax Information Reporting United States
September 13, 2019
California AB5 Gig Economy Bill will Affect Tax Reporting, But How?

California Governor Gavin Newsom is poised to sign into law a bill that would recategorize gig economy workers such as ride-share drivers from being independent workers to full-time employees.  The bill, California AB5, could have a profound impact on tax withholding and information reporting at state levels, with other states closely monitoring California’s activity. It […]

Sales & Use Tax United States
September 12, 2019
New Sales Tax Laws Require Ecommerce Retailers to Step up Cyber Monday 2019 Preparations

5 steps ecommerce retailers should take to prepare for Cyber Monday 2019 Retailers with ecommerce channels have a lot to gain during Cyber Monday or Cyber Week in 2019. According to BlackFriday.com, Cyber Monday spending is anticipated to grow 20% this year, with consumers spending nearly $9.5 billion online. Cyber Monday also falls on December […]

EMEA IPT
September 5, 2019
Location Location Location

EU and local legislation Location of risk is one of the key criteria an insurer must identify and consider before thinking about insurance premium taxes. It’s important to understand the location of risk rules and apply them correctly to be able to settle insurance premium taxes compliantly and to the correct tax authority. Whilst location […]